The Directors present their Strategic Report together with the audited financial statements for the year ended 31 December 2022 for AB INBEV UK LIMITED ("the Company").
The nature of the Company’s operations and its principal activities are brewing, distributing and importing beer. The Company is a wholly owned subsidiary. The ultimate parent company and controlling party is Anheuser Busch InBev NV/SA, incorporated in Belgium and the immediate parent company is Nimbuspath Limited, a company incorporated in the United Kingdom.
In 2022, the industry experienced its first year since 2019 without the disruptions caused by COVID-19 restrictions. The On-Trade sector made a commendable recovery, although it still lagged behind pre-pandemic levels. In contrast, the Off-Trade sector demonstrated stability and remained above pre-pandemic performance.
Throughout 2022, the economic landscape proved exceptionally demanding. The confluence of disruptions stemming from COVID-19, the conflict in Ukraine, escalating interest rates, worldwide supply chain bottlenecks, and a tight labor market collectively exerted significant pressure on our cost structure. Consequently, these factors posed substantial constraints on our capacity for growth and on operating profitability.
Despite these factors, we made significant progress in FY22 across each of our three strategic pillars: (1) Lead & Grow the Category (2) Digitize & Monetize our ecosystem & (3) Optimize the business to deliver strong results and build on our platform for superior long-term value creation.
We continue to invest in our people and evolve our culture with important enhancements to our operating model to further embed a long-term growth and value creation mindset throughout our organization
Looking ahead to 2023, while the operational landscape may remain dynamic, we are unwaveringly committed to executing our strategy and continuing our business momentum. Our primary focus involves collaborating closely with our customers to further develop and expand the category, particularly in the super-premium segment with Corona, Camden Town, and Innovation. We're also deeply committed to sustainability, with plans to brew all our beers using 100% renewable electricity whilst cultivating a community of responsible drinkers by enhancing our portfolio of no and low alcohol beverages.
We aim to advance the digitalisation of our business, exemplified by BEES, our business-to-business e-commerce platform; driving growth for our business partners. Additionally, we will expand our 'Perfect Draft' direct-to-consumer proposition as a major priority. A significant area of opportunity and focus for us remains the On-Trade channel. Here, we see substantial room for market share expansion. To achieve this, we will focus on distribution gains of our Premium and Super Premium portfolio while leveraging our alcohol-free and low-alcohol brands, and our craft portfolios.
The management of the business and the execution of the Company's strategy are subject to a number of risks.
The key business risks and uncertainties affecting the Company are considered to relate to increasing commodity costs which increases production costs. These are monitored regularly by the Board of Directors and management of the Company.
Risk management policy
The Company's Board of Directors monitor risk management and the controls in place. These controls are regularly reviewed.
The main risks affecting the Company and their related risk management policies are as follows:
Credit risk
No material exposure is considered to exist in respect of intercompany loans or third party debt. The Company has implemented policies that require appropriate credit checks on potential customers before sales are made and the Company monitors the exposure to individual customers on an ongoing basis. The Company principally trades with large, well-known businesses.
Interest rate risk
The Company has both interest-bearing intercompany assets and interest-bearing intercompany liabilities. No material exposure is therefore considered to exist with regard to changes in interest rates.
Foreign currency risk
Purchases of goods and services from overseas group undertakings are denominated in foreign currencies with the Company assuming the foreign currency risk. The Group treasury function takes out contracts to manage this risk at the group level with the use of financial derivatives governed by the Ultimate Parent Company’s policies approved by its Board of Directors. The Company does not use any foreign exchange derivatives for speculative purposes.
Climate change risk
Climate change is a big challenge affecting our industry and the whole world. It can impact the Company by affecting water and other raw materials' availability and prices. The Company has undertaken initiatives in order to have a positive impact on the environment such as the Corona sponsored beach clean ups around the UK and the Corona plastic-free beer can rings. No material financial exposure is considered to exist with regard to climate change risk.
Based on forecasts and current level of activity in the business, the Directors deem it appropriate to prepare the financial statements on a going concern basis.
In addition, Anheuser-Busch InBev NV/SA, the ultimate parent company of AB INBEV UK LIMITED has provided the Company with an undertaking that for at least twelve months from the date of approval of these financial statements, it will continue to make available such funds as are needed by the Company to enable the Company to continue in operational existence for the foreseeable future. As with any Company placing reliance on other group entities for financial support, the Directors acknowledge that there can be no certainty that the support will continue, although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.
The Directors use net revenue, gross profit, operating profit and cash from operations as a measurement of effectiveness of operations. The company reached a net revenue and gross profit of £1,597m and £416m respectively (2021: net revenue £1,666m, gross profit £429m).
The company uses non-financial KPIs on a regular basis, such as customer retention, employee engagement and company reputation.
Loss for the financial year amounts to £97m (2021: Profit for the financial year of £24m).
The Directors must act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, as set out in section 172 of the Companies Act 2006. In doing so, the Directors must have regard (among other matters) to:
the likely consequences of any decision in the long term;
the interests of the Company's employees;
the need to foster the Company's business relationships with suppliers, customers and others;
the impact of the Company's operations on the community and the environment,
the desirability of the Company maintaining a reputation for high standards of business conduct; and
the need to act fairly as between members of the Company.
The Directors acted in a way that they consider would promote the success of the Company in accordance with the above.
The Directors welcome the new legislation regarding stakeholder engagement.
The Company's Board of Directors consider the likely consequences of any decision in the long term by monitoring risk management and the controls in place. These controls are regularly reviewed. The Company also has access to sophisticated forecasting, business planning and macro and micro economic analysis.
The relationships with stakeholders are considered by the Board of Directors when making decisions and the impact these decisions may have on stakeholders.
We list below our key stakeholders and how we engage with them. The list reflects a combination of the key touchpoints of our business on a day to day basis, and others that are important to us as a business and our role in society. The Directors understand that not every decision they make will result in a positive outcome for all stakeholders. However, they aim to take them into consideration at all times alongside the Company’s purpose, values and strategic priorities.
Employees – In order to attract and retain the best people, the Company continually looks for effective ways to engage with and reward its employees. It offers a wide range of flexible benefits, including healthcare and pension plans. Senior employees are given the opportunity to participate in group-wide employee share schemes.
The Company acts to protect jobs by pursuing a profitable growth strategy. Managing costs tightly ensures that resources are best deployed.
The Company is committed to increasing employee engagement and involvement and believes that effective two way communication between the Company and its employees brings real business benefits. Employees have opportunities to express their views at meetings with management and through regular employee opinion surveys. These surveys are then reviewed and turned into engagement action plans, to which management strive to improve results annually.
On a regular basis, employees are made aware of the financial performance of the Company, their business units and of the wider group as a whole, via in house newsletters, emails, all employee meetings and online calls with senior leaders. Questions are routinely taken and answered by senior leaders as part of the meetings and online sessions.
Directors meet monthly to discuss in detail initiatives related to employees and in between these routine meetings the directors have weekly team meetings, 1:1’s with executive teams and frequent ad hoc meetings with the People team and employees.
Suppliers - Our suppliers are fundamental to our business. Our strong long-term working relationships with our suppliers are important to ensure the efficiency of the Company’s operations and we pride ourselves on working fairly with all of our suppliers. The Company receives full support from an expert procurement team in its supplier relationships who apply European best practice.
Customers - Customers are of course a key part of our business, and our teams talk to them every day to understand their concerns and to work with them to support mutual goals. The Company aims to be number one in customer service and makes its business decisions accordingly.
Consumers - A key part of our culture is recognising that the consumer is the boss, and on that basis we work every day to put the consumer at the centre of what we do. We aim to create a nation of smart drinkers and to champion Britain’s iconic beer culture.
Community – We recognise the importance of having strong working relationships with our local communities, in particular around our breweries in Samlesbury in Ribble Valley in the North West of England, established in 1972 and Magor in South Wales, established in 1979. Our other breweries in Camden Town and Enfield are craft brewing innovators. In 2022 we were the first alcohol company to partner with the NHS on our City Pilots program which used methodology recommended by the World Health Organisation to reduce alcohol harm through Screening and Brief Intervention events at shopping centres in the Greater Manchester Area. We also launched our “Get Every Bud Home Safe” campaign partnering with the Safety App to help women and vulnerable individuals find a safe path home thus creating a more inclusive nighttime economy.
Environment - We strive to make the world a better place, combining our scale, resources and energy with the needs of our communities. Our sustainability strategy is embedded throughout our business and across our supply chain. In 2022 we achieved our goals of brewing with 100% renewable electricity in our UK operations and remain committed to achieving a 25% reduction in CO2 emissions across our value chain by 2025 (vs. a baseline of 2017). Our ambition is to achieve net zero emissions across our entire value chain by 2040.
Government and Regulators – We are a founder member of the Portman Group, support Drinkaware and Club Soda, and are a central member of the British Beer and Pub Association. We are also members of the All Party Parliamentary Beer Group, All Party Parliamentary Corporate Responsibility Group, Parliamentary Renewable and Sustainable Energy Group and Industry and Parliament Trust. We engage openly and proactively with Governments and Councils at a national, devolved and local level to support our industry and work towards supporting its success in the future.
As a Company, we never take shortcuts. We know that integrity, hard work, quality, and responsibility are key to building our business. On that basis, we strive to maintain a reputation for high standards of business conduct when acting with all of our stakeholders.
Acting fairly between members - Finally, with regard to the need to act fairly as between members of the Company, the Company is wholly owned by Nimbuspath Limited.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2022.
The results for the year are set out on page 15.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
In May 2023, the Company issued 1 additional share to Nimbuspath Limited, its parent entity and the only eligible member of the company (representing 100 percent of the total voting rights of the Company). The nominal value of the share is £1.00; the amount paid for the share is £75,000,000.
Moore Kingston Smith LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, and are deemed to be reappointed under section 487(2) of the Companies Act 2006.
To calculate the carbon emissions from the energy consumption we first measure the actual energy consumption in the breweries and report these numbers internally through our bespoke carbon model. To then calculate the CO2 emissions we multiply the MJ/KW consumed with carbon emission (intensity) factors. Our carbon reporting is audited at global level as per our latest ESG report found at https://www.ab-inbev.com/sustainability/.
At AB InBev Europe, which includes AB InBev UK, as part of our Global Sustainability Goals, we have committed to sourcing 100% of our purchased electricity from renewable sources by 2025 to ensure our operations are helping to power a more sustainable future.
In 2022, we were proud to announce that we have achieved this ambitious goal in the UK three years early, and all of our beers brewed in the UK – including Budweiser, Corona and Stella Artois – are now brewed with 100% renewable electricity from a mix of on-site, near-site solar and wind installations and by certificated (GoOs).
The chosen intensity measurement ratio is total gross scope 1 and 2 brewery emissions in kg CO2e per HL of beer sold.
From building a resilient and agile value chain, to solidifying our role as a trusted partner in local communities, to identifying and capturing new sources of business value, sustainability plays a key role in fulfilling our company purpose and enabling our commercial vision.
We sharpened our focus on eight strategic ESG priorities to deliver on our commercial strategy: Smart Drinking & Moderation, Climate, Water Stewardship, Sustainable Agriculture, Circular Packaging, Ethics & Transparency, Entrepreneurship and Diversity & Inclusion.
We have an ambition to achieve net zero across our value chain by 2040 and we have an intention to achieve net zero operations in our largest European breweries (including Samlesbury and Magor) by the end of 2028. Our company has identified 29 distinct technologies that show great promise to contribute to the net-zero operations ambition and several have already been implemented in our UK breweries. Among them are Simmer&Strip, highly efficient wort coolers, dry de-husking and soon CO2 recovery.
We have audited the financial statements of AB INBEV UK LIMITED (the 'company') for the year ended 31 December 2022 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK financial reporting standards as issued by the Financial Reporting Council, and UK taxation legislation.
We obtained an understanding of how the company complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The income statement has been prepared on the basis that all operations are continuing operations.
The notes on pages 19 to 44 form part of these financial statements.
The notes on pages 19 to 44 form part of these financial statements.
The notes on pages 19 to 44 form part of these financial statements.
AB INBEV UK LIMITED is a private company limited by shares incorporated in England and Wales. The registered office is Bureau, 90 Fetter Lane, London, United Kingdom, EC4A 1EN. The company's principal activities and nature of its operations are disclosed in the directors' report.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £'000.
As permitted by FRS 101, the company has taken advantage of the following disclosure exemptions from the requirements of IFRS:
inclusion of an explicit and unreserved statement of compliance with IFRS;
presentation of a statement of cash flows and related notes;
disclosure of the objectives, policies and processes for managing capital;
disclosure of key management personnel compensation;
disclosure of the categories of financial instrument and the nature and extent of risks arising on these financial instruments;
the effect of financial instruments on the statement of comprehensive income;
comparative period reconciliations for the number of shares outstanding and the carrying amounts of property, plant and equipment, intangible assets, investment property and biological assets;
disclosure of the future impact of new International Financial Reporting Standards in issue but not yet effective at the reporting date;
a reconciliation of the number and weighted average exercise prices of share options, how the fair value of share-based payments was determined and their effect on profit or loss and the financial position;
comparative narrative information;
for financial instruments, investment property and biological assets measured at fair value and within the scope of IFRS 13, the valuation techniques and inputs used to measure fair value, the effect of fair value measurements with significant unobservable inputs on the result for the period and the impact of credit risk on the fair value; and
related party disclosures for transactions with the parent or wholly owned members of the group.
The Company is a wholly owned subsidiary of Nimbuspath Limited and is included in the consolidated financial statements of Anheuser-Busch InBev NV/SA, incorporated in Belgium, which are publicly available and can be obtained from the address noted in note 25. Consequently, the Company has used the right of exemption from preparing consolidated financial statements under the terms of section 400 of the Companies Act 2006. These financial statements are separate financial statements.
Operating segments are applied using the "management approach", where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Markers ("CODM"). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.
Based on forecasts and current level of activity in the business, the Directors deem it appropriate to prepare the financial statements on a going concern basis.
In addition, Anheuser-Busch InBev NV/SA, the ultimate parent company of AB InBev UK Limited has provided the Company with an undertaking that for at least twelve months from the date of approval of these financial statements, it will continue to make available such funds as are needed by the Company to enable the Company to continue in operational existence for the foreseeable future.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less impairment losses.
For the purposes of impairment testing, goodwill is allocated to the cash-generating units expected to benefit from the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is subsequently reversed if, and only if, the reasons for the impairment loss have ceased to apply.
Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.
Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.
Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Licenses: 4 years being the duration of the licenses
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Freehold land and assets in the course of construction are not depreciated.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the income statement.
Interests in subsidiaries are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
In determining the cost of raw materials, consumables and goods purchase for resale, the weighted average purchase price is used. For work in progress and finished goods, cost is taken as production cost. A provision is recognised for slow moving and obsolete stock.
Net realisable value is the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
The company recognises financial debt when the company becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
Other financial liabilities, including borrowings, trade payables and other short-term monetary liabilities, are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
The tax expense represents the sum of the tax currently payable and deferred tax.
The net interest element is determined by multiplying the net defined benefit liability by the discount rate, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments. The net interest is recognised in profit or loss as other finance revenue or cost.
Remeasurement changes comprise actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability excluding amounts included in net interest. These are recognised immediately in other comprehensive income in the period in which they occur and are not reclassified to profit and loss in subsequent periods.
The net defined benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid price. The value of a net pension benefit asset is limited to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the binomial Hull model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest.
Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each Balance Sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
Restricted stock units ('RSUs') give employees interest in their employer's equity but have no tangible value until they are vested. The RSUs are assigned a fair market value when they vest. RSUs are considered income once vested, and a portion of the shares is withheld to pay income taxes. The employee then receives the remaining shares and has the right to sell them.
At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are outlined below.
Based on the size of the property, plant and equipment balance in the current year, a critical estimate lies around the determination of the useful economic life of property, plant and equipment. Property, plant and equipment has also been depreciated to a £nil residual value which the company deems reasonable based on the lifetime of the assets. See note 12 for further detail.
The liability to the pension schemes is dependent on the life expectancy estimations in relation to both current and former employees, discount and inflation rates used in the actuarial modelling, future pension increases and asset valuations. The scheme liabilities are estimated by an independent actuary and are calculated using industry models. See note 22 for further detail.
The consideration of the impairment of the company's goodwill and other intangible and tangible assets requires key assumptions and estimations to establish the value in use of the cash generating units to which the goodwill relates. The value in use calculations require the entity to estimate discount rates, growth rates and expected cash flows. Discount rates are estimated using pre-tax rates that reflect the weight average cost of capital, growth rates are estimated using the company's long term growth rates and cash flows are estimated using extrapolated financial budgets approved by management. See note 11 for further detail.
Turnover represents the amounts derived from the provision of goods to customers, including duty, after deducting discounts and value added tax. Turnover to third parties by destination is not materially different from the turnover by origin. The Company operates in one class of business being the manufacture and distribution of beer.
An analysis of the company's revenue is as follows:
Moore Kingston Smith LLP was appointed as auditor to the company in the current year (2021: RSM UK Audit LLP).
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
Employees participate in an annual bonus scheme, which includes performance measurements for the Company and economic benefits. This encourages employees' involvement in the Company's performance and also ensures a common awareness of the financial and economic factors that affect the performance of the Company. Senior management are also entitled to join the share option scheme provided by the ultimate parent company.
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 5 (2021: 7). Directors' emoluments includes £32,154 (2021: £38,611) in pension contributions.
During the period, no (2021: no) director exercised share options which are held in the ultimate parent company, Anheuser-Busch InBev NV/SA.
The charge/(credit) for the year can be reconciled to the loss per the income statement as follows:
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:
Factors that may affect future tax charges
The UK corporation tax rate for the financial year was 19%. On 3 March 2021, it was announced that the main rate of corporation tax would increase to 25% with effect from 1 April 2023.
Deferred taxes at the reporting date have been measured and reflected in these financial statements using the substantively enacted tax rate of 25% effective from 1 April 2023.
There were no other factors that may affect future tax charges.
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) of the brand/brands that are expected to benefit from that business combination.
Goodwill relates to the acquisition of The Whitbread Beer Company assets. An impairment test is carried out once a year, using value in use calculation, to ensure that the CGU represents the long term position of the Company. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected cash flows during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the brands associated to the CGU. The growth rates are based on long term company growth rates.
The Company prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next ten years. The rate used to discount the forecasted cash flows from the goodwill is 9.2% (2021: 4.1%).
Property, plant and equipment includes right-of-use assets, as follows:
The net book value of fixed assets above (primarily plant & machinery) includes assets under construction of £29,527k (2021: £13,200k) as at 31 December 2022. During the year, £85,492k was added to assets under construction and £69,165k was put into operation.
Details of the company's subsidiaries at 31 December 2022 are as follows:
Registered office addresses (all UK unless otherwise indicated):
The investments in subsidiaries are all started at cost less impairment.
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon during the current and prior reporting period.
A deferred tax asset is held to account for depreciation in advance of capital allowances. The utilisation of this deferred tax asset is dependent on the forecast future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences.
No deferred tax asset has been recognised in respect of tax losses amounting to £34,082k (2021: £41,744k) as the timing of the future economic benefit from these losses should they be relieved to the group isn't known with certainty.
Other provisions includes dilapidations expected to be utilised by 2024 and a pension provision which has an expected utilisation date of 2040.
The Company operates four Defined Benefit Pension Schemes.
AB InBev UK Ltd Pension Plan (the "Plan"):
The Plan is a funded defined benefit scheme which is closed to new members and closed to future accrual with effect from 31 May 2013.
The Plan's funds are administered by trustees and are independent of the Company's finances.
Contributions are paid to the Plan in accordance with the recommendations of an independent actuarial adviser.
The valuation of the liabilities for the Plan has been based on results from the actuarial valuation of the Plan as at 31 December 2020, rolled forward to 31 December 2022. This roll forward allows for actual cashflows from 1 January 2021 to 31 December 2022 and also changes in market conditions. The roll forward does not make any allowance for membership movements since 31 December 2018.
The weighted average duration of the defined obligation of the scheme is 20 years.
InBev UK Ltd Top-Up Pension ("ITUP"):
The ITUP is unfunded.
The ITUPs funds are administered by trustees and are independent of the Company's finances.
The valuation of ITUP is based on a valuation of the one existing member’s benefits as at 31 December 2020.
The weighted average duration of the defined obligation of the scheme is 16 years.
Stag Brewing Pension Plan (“Stag”):
The plan is a funded defined benefit scheme which is closed to new members and closed to future accrual with effect from 1 April 2012.
The Plan's funds are administered by trustees and are independent of the Company's finances.
Contributions are paid to the Plan in accordance with the recommendations of an independent actuarial adviser.
The valuation of the liabilities for Stag has been based on the results of the actuarial valuation of Stag as at 1 April 2021, rolled forward to 31 December 2022. This roll forward allows for actual cashflows from 1 April 2021 to 31 December 2022 and also changes in market conditions. The roll forward does not make any allowance for membership movements since 1 April 2021.
The weighted average duration of the defined obligation of the scheme is 21 years.
Inbev Ireland Limited Pension Plan ("Inbev Ireland"):
The plan was transferred to AB Inbev UK Limited in January 2019, when Inbev Ireland Limited became dormant. The scheme is closed to new members and future accrual.
The figures below are in respect of the of the Company's participation in these schemes which have been derived using established methodology as disclosed above and including the projected unit credit method to determine the present value of the defined benefit obligation and service cost.
Due to 87% of the schemes assets being invested in debt securities, the major risk to which the scheme exposes the Company is debt securities market risk.
Different share and share option programmes allow Company senior management and members of the Board of Directors to acquire shares of Anheuser-Busch InBev NV/SA (the ultimate parent company). The options' exercise price equals the average market price of the underlying shares in the thirty calendar days preceding the offer date. The options have a contractual life of 10 years. The fair value of the options granted is estimated at grant date, using the binomial Hull model. Until 2005, the Company used the Black-Scholes-Merton option pricing model to determine the fair values of its employee share options granted.
Since the acceptance period of the options is two months, the fair value was determined as the average of the fair values calculated on a weekly basis during the two months offer period. The fair value of options granted to employees is expensed over the vesting period.
Expected volatility is based on historically calculated volatility using 1,766 days of historical data. In the determination of the expected volatility the group is excluding the volatility measured during the period 15 July 2008 until 30 April 2009, in view of the extreme market conditions experienced during that period. The binomial Hull model assumes that all employees would immediately exercise their options if the AB InBev share price is 2.5 times above the exercise price. As a result, no single expected option life applies.
The range of exercise prices of the outstanding option is between £56.25 and £101.49 while the weighted average remaining contractual life is 5.29 years.
As at 31 December 2022, the Company has 815,900 (2021: 507,716) outstanding restricted stock units (“RSUs”) to certain members of senior management. Upon vesting, each RSU gives the executive the right to receive one existing AB InBev share. The RSUs can have a vesting period of 3 years. The shares resulting from the RSU vesting will only be delivered provided a performance test is met by the company. Specific forfeiture rules apply if the employee leaves the company before the performance test achievement or vesting date.
The Company has one class of ordinary share which is entitled to one vote in any circumstance.
Each share is entitled pari passu to dividend payments or any other distribution. Each share is entitled pari passu to participate in a distribution arising from a winding up of the company.
In May 2023, the Company issued 1 additional share to Nimbuspath Limited, its parent entity and the only eligible member of the company (representing 100 percent of the total voting rights of the Company). The nominal value of the share is £1.00; the amount paid for the share is £75,000,000.