Audit Committee Report

Chairman’s Introduction to the Audit Committee Report

I am pleased to report on the work of the Committee for the year ended 29 February 2020.

During the year the Committee continued to play a key role in assisting the Board in fulfilling its oversight responsibility. Its activities included reviewing and monitoring the integrity of financial information, the Group’s system of internal controls and risk management, the internal and external audit process and recommending appointment of the external auditor and determining their remuneration.

We have considered the processes underpinning the production and approval of this year’s Annual Report to enable the Board to confirm that the Annual Report taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. The Committee also assessed the viability of the Group over a three-year period, in particular, considering the potential impact of COVID-19 on the business and its prospects. Further details on the outcome of this assessment can be found on pages 20 to 21.

There were six meetings during the year and after each Committee meeting I provided an update to the Board on the key issues discussed during our meetings. I also met separately with the external audit partner and senior management on a number of occasions during the year.

This report sets out details of the role of the Committee and how it has discharged its duties and responsibilities during the year.

I would like to thank my colleagues for their contribution and counsel over the past 12 months. For the 2020 Annual General Meeting, your attention is drawn to details set out in the notice of meeting. Given government and health authority guidance on COVID-19 is still evolving, shareholders are encouraged to monitor the Company’s website and regulatory news for updates in relation to the AGM.

On behalf of the Board.

Emer Finnan

Chairman of the Audit Committee

3 June 2020

Role and Responsibilities of the Committee

The Committee supports the Board in fulfilling its responsibilities in relation to financial reporting, monitoring the integrity of the financial statements and other announcements of financial results published by the Group; and reviewing and challenging any significant financial reporting issues, judgements and actions of management in relation to the financial statements. The Committee reviews the effectiveness of the Group’s internal controls and risk management systems and the effectiveness of the Group’s Internal Audit function. On behalf of the Board, the Committee manages the appointment and remuneration of the External Auditor and monitors its performance and independence. The Group supports an independent and confidential whistleblowing procedure and the Committee monitors the operation of this facility.

In accordance with the Code, the Board requested that the Committee advise it whether it believes the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

The Committee’s Terms of Reference reflect this requirement and can be found in the Investor Centre section of the Group’s website. A copy may be obtained from the Company Secretary.

Membership and Meeting Attendance

The following non-executive Directors served on the Committee during the year:




Number of Meetings


Maximum Possible


% of Meetings


Emer Finnan (Chairman)

2 July 2014




Vincent Crowley

22 March 2016




Jim Thompson

1 March 2019




All members of the Committee are, and were considered by the Board to be throughout the year under review, independent.

The Committee members have been selected to provide the wide range of financial and commercial expertise necessary to fulfil the Committee’s duties and responsibilities. As a qualified chartered accountant, I am considered by the Board to have recent and relevant financial experience, as required by the Code. The Committee is considered by the Board as a whole to have competence relevant to the sector in which the Group operates. Details of the skills and experience of the Directors are contained in the Directors’ biographies on pages 56 and 57 of the Annual Report and Accounts.

The Committee has access to the Group’s finance team, to its Internal Audit function and to its External Auditor and can seek further professional training and advice, at the Group’s cost, as appropriate.

The quorum necessary for the transaction of business by the Committee is two, each of whom must be a Non-executive Director. Only members of the Committee have the right to attend Committee meetings, however, during the year, Stewart Gilliland (in his capacity as Chairman), Stephen Glancey, Group Chief Executive Officer, Jonathan Solesbury, Group Chief Financial Officer, the Head of Internal Audit together with members of her team, Group Finance Director, and representatives from Ernst & Young (“EY”), the External Auditor, were invited to attend meetings. The Committee also meets separately with the Head of Internal Audit and the External Auditor without management being present.

The Company Secretary is Secretary to the Committee.

Meeting Frequency and Main Activities in the Year

The Committee met on five scheduled occasions during the year ended 29 February 2020. In addition there was one meeting by conference call to review a trading statement for recommendation to the Board. All members of the Committee attended every meeting.

During the year ended 29 February 2020, the Committee reviewed and made recommendations to the Board on the Preliminary Results Announcement for the period to 28 February 2019, the 2019 Annual Report and Accounts, the Interim Results Announcement for the period to 31 August 2019, the trading update for the four months to 31 December 2019, and updating the Committee’s Terms of Reference.

Since 29 February 2020, the Committee has met seven times. These meetings were to review and make recommendations to the Board on the pre-close trading update for the period to 29 February 2020; the COVID-19 Update Announcement; the Preliminary Results Announcement for the period to 29 February 2020, to review and assess the impact of COVID-19 on the business; and to review the 2020 Annual Report and Accounts.

In carrying out its reviews during the year, the Committee considered:

  • whether the Group had applied appropriate accounting policies and practices both on a year on year basis and across the Group;
  • the significant areas in which judgement had been applied in preparation of the financial statements in accordance with the accounting policies set out on pages 111 to 126 of the Annual Report and Accounts;
  • reports from the Group Chief Financial Officer and the External Auditor;
  • the clarity and completeness of disclosures and compliance with relevant financial reporting standards and corporate governance and regulatory requirements; and
  • whether the Annual Report and Accounts, taken as a whole, was fair, balanced and understandable and provided the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

The Committee also:

  • approved the Internal Audit plan and agreed the External Auditor’s work plans for the Group;
  • considered regular reports from the Head of Internal Audit on their findings;
  • reviewed and recommended revisions to the Board to the Group Risk Register and the Principal Risks and Uncertainties; and
  • reviewed the External Auditor’s independence and objectivity, the effectiveness of the audit process, the re-appointment of the External Auditor and approved the External Auditor’s remuneration.

Significant Judgemental Areas

The significant areas of judgement considered by the Committee in relation to the accounts for the year ended 29 February 2020 and how these were addressed are outlined below. Each of these areas received particular focus from the External Auditor, who provided detailed analysis and assessment of the matters in their report to the Committee.

Going Concern

In conjunction with the Company’s other external advisers, the Committee and the Board reviewed and assessed the work undertaken to support the adoption of the going concern basis for the FY2020 financial statements.

The Committee has also considered the impact of the COVID-19 pandemic on the business. The Committee reviewed the draft Going Concern Statement, Viability Statement and Directors Compliance Statement prior to recommending them to the Board for their review and approval. These statements are included in the Directors’ Report on page 55 and the Risk Report on pages 20 to 21.

The reviews included assessing the effectiveness of the actions undertaken by the Group’s management team to evaluate going concern, including the analysis supporting the Going Concern Statement and disclosures in the financial statements. In particular, the Committee and the Board reviewed the Group’s short-term cash flow forecasts, the cash flow forecasts for the period ending 28 February 2021 which were revised post year end in light of COVID-19 and the updated three year strategic plan, the assumptions relating to the profitability and cash generation of the business, the achievement of cost saving measures, the Group’s financing facilities and future funding plans. In addition to the base case scenario forecast, which included an estimate of the impact of COVID-19, the Group examined the impact on cash flows of a change in the assumptions in respect of the extent and timing of the recovery in the on-trade business from the pandemic, and benchmarked the impact against the new monthly liquidity and gross debt covenant waiver tests for FY2021 and through the going concern assessment period.

The Committee and the Board consider it appropriate to adopt the going concern basis of accounting with no material uncertainties as to the Group’s ability to continue to do so. The Committee also reviewed the Viability Statement scenario workings assessing the ability of the Group to continue trading for at least three years. In making this assessment, the Committee and Board have also considered the impact of COVID-19. While there will be a negative impact on the business, the Committee and the Board do not expect any reasonably anticipated COVID-19 outcomes to impact the Group’s ability to continue as a going concern.

For further information on the work undertaken by the Committee, the Board and management in relation to the going concern basis of preparation for the 2020 financial statements, please see ‘Going Concern’ on page 20 and ‘Viability Statement’ on pages 20 to 21. The Directors’ Going Concern statement is set out on page 20.

Trade Receivables and Trade Loans recoverability

The Group has a risk through exposure to on-trade receivable balances and advances to customers who may experience financial difficulties. Given the uniqueness of the COVID-19 outbreak, the assessment of the impact of the outbreak on the Group’s expected credit loss model required significant judgement by the Committee. In particular, the Committee considered the basis used by management in calculating the expected credit losses, whether it adequately captured the additional risks in the current environment and the level of security in respect of those loans. As a result of the review process, the Committee concluded that the expected credit loss on trade receivables and loans was prudent but appropriate and were properly reflected in the consolidated financial statements.

Goodwill and intangible assets impairment testing

The Committee considered the carrying value of goodwill and intangible assets as at the year-end date to assess whether or not it exceeded the expected recoverable amounts for these assets. In particular, the Committee considered the value-in-use financial models, including sensitivity analysis, used to support the valuation and the key assumptions and judgements used by management underlying these models including consideration for COVID-19. The key assumptions used in the financial models and consequently the key focus areas for the Committee relate to future volume, net revenue and operating profit, the growth rate in perpetuity and the discount rate applied to the resulting cash flows. The Committee considered the outcome of the financial models and found the methodology to be robust, and in all instances concluded that the outcome was appropriate. This included the recognition of an impairment with respect to the Group’s Woodchuck brand of €34.1 million.

Valuation of property, plant and equipment

The Group values its land and buildings and plant and machinery at market value/depreciated replacement cost (‘DCR’) and consequently carries out an annual valuation. The Group engages external valuers to value the Group’s property, plant and machinery at a minimum every three years or as at the date of acquisition for assets acquired as part of a business combination. An external valuation was conducted at 29 February 2020 by PricewaterhouseCoopers LLP to value the land and buildings and plant and machinery at the Group’s Clonmel (Tipperary), Wellpark (Glasgow), Vermont (USA) and Portugal sites, along with the Group’s various Depots. Following a review of PwC’s valuation report, the Committee is satisfied that the adjustments posted were reasonable and that the carrying values at 29 February 2020 are appropriate.

Revenue recognition

The Committee considered the Group’s revenue recognition policy and is satisfied it is appropriate and in line with IFRS 15 Revenue from Contracts with Customers.

IFRS 16 Leases Implementation

The Committee considered the assumptions, calculations and assessment of the impact on the accounts of the new lease accounting standard, IFRS16, which the Group adopted on 1 March 2019. The Committee concluded that the approach adopted and the disclosures in the financial statements were appropriate.

Following discussions with the External Auditor, and the deliberations set out above, we were satisfied that the financial statements dealt appropriately with each of the areas of significant judgement.

The External Auditor also reported to the Committee on any misstatements that they had found in the course of their work.

Fair, Balanced and Understandable Assessment

One of the key compliance requirements of a group’s financial statements is for the Annual Report and Accounts to be fair, balanced and understandable. The coordination and review of Group wide contributions into the Annual Report and Accounts follows a well established and documented process, which is performed in parallel with the formal process undertaken by the External Auditor.

The Committee received a summary of the approach taken by management in the preparation of the 2020 Annual Report and Accounts to ensure that it met the requirements of the Code. This, and our own scrutiny of the document, enabled the Committee, and then the Board, to confirm that the 2020 Annual Report and Accounts taken as a whole, was fair, balanced and understandable and provided the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

Internal Controls and Risk Management Systems

The Committee is responsible, on behalf of the Board, for reviewing the effectiveness of the Group’s internal controls and risk management systems, including financial, operational and compliance controls.

In order to keep the Committee abreast with latest developments, the Head of Internal Audit reported to each meeting on developments and emerging risks to internal control systems and on the evolution of our principal risks. The Committee reviewed the updated principal risks, their evolution during the year, and the associated risk appetites and metrics in light of business changes and performance, challenging and confirming their alignment to the achievement of the Group’s strategic objectives. At each meeting, the Committee considered the ongoing overall assessment of each risk, their associated metrics and management actions and mitigations in place and planned. This review was supported through consideration of risk dashboards outlining both principal risks and any escalated or emerging risks resulting in the addition of new risk regarding COVID-19, and the reclassification of two risks, namely Sustainability and Brand and Reputation. Those changes to our risk profile were then approved by the Board.

In addition, the Committee reviewed reports issued by both Internal Audit and the External Auditor and held regular discussions with the Group Chief Financial Officer, the Head of Internal Audit and representatives of the External Auditor. During the course of these reviews, the Committee has not identified nor been advised of any failings or weaknesses which it has determined to be significant.

Internal Audit

The Committee is responsible for monitoring and reviewing the operation and effectiveness of the Internal Audit function including its focus, work plan, activities and resources.

At the beginning of the financial year, the Committee reviewed and approved the Internal Audit plan for the year having considered the principal areas of risk in the business and the adequacy of staffing levels and expertise within the function. During the year, the Committee received regular verbal and written reports from the Head of Internal Audit summarising findings from the work of Internal Audit and the responses from management to deal with the findings.

The Committee monitors progress on the implementation of any action plans arising on significant findings to ensure these are completed satisfactorily and meets with the Head of Internal Audit in the absence of management.

External Audit

It is the responsibility of the Committee to monitor the performance, objectivity and independence of EY, the External Auditor. In December 2019, we met with EY to agree the audit plan for the year end, highlighting the key financial statement and audit risks, to ensure that the audit was appropriately focused. In addition, EY’s letter of engagement and independence was reviewed by the Committee in advance of the audit.

In May 2020, in advance of the finalisation of the financial statements, we received a report from EY on their key audit findings, which included the key areas of risk and significant judgements referred to above, and discussed the issues with them in order for the Committee to form a judgement on the financial statements. In addition, we considered the Letter of Representation that the External Auditor requires from the Board.

The Committee meets with the External Auditor privately at least once a year to discuss any matters they may wish to raise without management being present.

Assessment of Effectiveness of External Audit

The Committee obtained feedback on the effectiveness and efficiency of the external audit process from completion of a short questionnaire by each member of the Committee, the Group Chief Financial Officer, the Director of Group Finance, the Group Strategy and Finance Director and applicable senior finance executives across the business. The results were reviewed by the Committee and the Committee concluded that the external audit process as a whole had been conducted robustly and the team selected to undertake the audit had done so thoroughly and professionally. EY’s performance as auditor to the Company during FY2020 was therefore considered to be satisfactory.

Audit Tender

The current External Auditor was first appointed for the year ended 28 February 2018 and the external audit had not been tendered since then.

There are no contractual obligations restricting the Company’s choice of External Auditor. The Committee will continue to review the auditor appointment and the need to tender the audit, ensuring the Group’s compliance with the Code and any related regulations.

Non-Audit Services

The Group has a policy in place governing the provision of non-audit services by the External Auditor in order to ensure that the External Auditor’s objectivity and independence is safeguarded.

Under this policy the auditor is prohibited from providing non-audit services if the auditor:

  • may, as a result, be required to audit its own firm’s work;
  • would participate in activities that would normally be undertaken by management;
  • would be remunerated through a “success fee” structure or have some other mutual financial interest with the Group; and
  • would be acting in an advocacy role for the Group.

Other than above, the Company does not impose an automatic ban on the External Auditor providing non-audit services. However, the External Auditor is only permitted to provide non-audit services that are not, or are not perceived to be, in conflict with auditor independence and objectivity, if it has the skill, competence and integrity to carry out the work and it is considered by the Audit Committee to be the most appropriate to undertake such work in the best interests of the Group. The engagement of the External Auditor to provide non-audit services must be approved in advance by the Audit Committee or entered into pursuant to pre-approved policies and procedures established by the Audit Committee and approved by the Board.

The nature, extent and scope of non-audit services provided to the Group by the External Auditor and the economic importance of the Group to the External Auditor are also monitored to ensure that the external auditor’s independence and objectivity is not impaired. The Audit Committee has adopted a policy that, except in exceptional circumstances with the prior approval of the Audit Committee, non-audit fees paid to the Group’s auditor should not exceed 100% of audit fees in any one financial year.

EY did not provide any other services other than audit services. Details of the amounts paid during the year for audit services are set out in note 2 to the financial statements.

Confidential Reporting Programme

In line with best practice, the Group has an independent and confidential reporting programme in all of its operations whereby employees can, in confidence, report on matters where they feel a malpractice has taken or is taking place, or if health and safety standards have been or are being compromised. Additional areas that are addressed by this procedure include criminal activities, improper or unethical behaviour and risks to the environment.

The programme allows employees to raise their concerns with their line manager or, if that is inappropriate, to raise them on a confidential basis. An externally facilitated confidential helpline and confidential email facility are provided to protect the identity of employees in these circumstances. Any concerns are investigated on a confidential basis by the Human Resources Department and/or the Company Secretary and Group General Counsel and feedback is given to the person making the complaint as appropriate via the confidential email facility. An official written record is kept of each stage of the procedure and results are summarised for the Committee.

The Audit Committee is also responsible for ensuring that arrangements are in place for the proportionate independent investigation and appropriate follow up of any concerns which might be raised. The Committee receives regular reports on all whistleblowing incidents. The Board also receives a report on whistleblowing in the Company Secretary and Group General Counsel’s regular report to Board meetings. In FY2020, no incidences of concern were uncovered.

We encourage employees to report genuine issues and concerns as they arise. Those concerns are taken seriously. They are investigated where appropriate and confidentiality is respected.

Evaluation of the Committee

The evaluation of the Committee was completed as part of the 2020 external board evaluation process conducted by Independent Audit. An explanation of how this process was conducted, the conclusions arising from it and the action items identified is set out on pages 64 and 65. The Committee has considered this in the context of the matters that are applicable to the Committee.

This report was approved by the Board of Directors on 3 June 2020.

Emer Finnan

Chairman of the Audit Committee