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    RIC-B0237a R&R Annual Report 2015.qxp_Layout 1 02/03/2016 12:21 Page 2


    DIRECTORS: Ibrahim Najafi,Andy Finneran

    SECRETARY: Andy Finneran

    INDEPENDENT AUDITORS:PricewaterhouseCoopers LLP, Benson House,33 Wellington Street, Leeds LS1 4JP

    BANKERS: Barclays Bank Plc, PO Box 190, 2nd Floor, 1 Park Row, Leeds LS1 5WU

    SOLICITORS: Allen & Overy LLP, One Bishops Square,London E1 6AD

    REGISTERED OFFICE: Richmond House, Plews Way, Leeming Bar Industrial Estate, Northallerton,North Yorkshire DL7 9UL

    Registered No. 05777981

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    Strategic report 02

    Corporate governance 07

    Directors report 09

    Statement of Directors' responsibilities 10

    Independent auditors report to themembers of R&R Ice Cream plc 11

    Consolidated financial statements

    Consolidated income statement 13

    Consolidated statement of comprehensive income 14

    Consolidated statement of changes in equity 14

    Consolidated statement of financial position 15

    Consolidated statement of cash flows 15

    Accounting policies 16

    Notes to the consolidated financial statements 20

    Company only accounts

    Company only statement of financial position 39

    Company only statement of changes in equity 39

    Accounting policies 40

    Notes to the Company only accounts 40


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    OVERVIEWR&R Ice Cream plc (R&R) is the third largest global manufacturer of icecream products and the largest private label manufacturer in the world.R&R is the second largest take-home ice cream manufacturer in Europe,with leading market shares in each of the United Kingdom, German, Frenchand Italian ice cream markets. We also have a leading market share inAustralia and South Africa following the acquisition of Peters Food GroupLimited (Peters) in June 2014 and the acquisition of Nestl South Africasice cream business (R&R South Africa) in May 2015.

    R&R offers a broad product range of branded and private label ice creamproducts. We primarily produce take-home ice cream products, including icecream tubs and multipacks of ice cream cones, ice lollies, ice cream sticks andice cream desserts, and impulse products, which individuals buy on impulsefor immediate consumption. Our scale, focus on large, stable take-homemarkets and highly efficient manufacturing operations provide us with keyadvantages over our competitors and have allowed us to continue togenerate stable earnings and significant free cash flow through variouseconomic cycles. We believe our broad product range allows us to maintainstrong sales volumes as consumer demand shifts between branded andprivate label products.

    For the year ended December 31, 2015, we generated Adjusted EBITDA(a)

    of 187.7 million, revenue of 991.6 million and free cash flow beforeacquisitions and exceptional operating items(a) of 113.4 million.

    R&R operates eleven plants located in seven countries, on three continents.Eight of these plants are in the four largest ice cream markets in Europe(the UK, Germany, France and Italy), which allows us to supply our customersquickly and efficiently in their markets. Our manufacturing platform benefitsfrom many years of significant capital investment and footprint rationalisation.Our plants have also benefited from sharing and implementation of bestpractices and procedures across our group in order to leverage technologicalexpertise. We believe that our scale and manufacturing footprint provides uswith a competitive advantage over most of our competitors, which aregenerally smaller and only offer regional distribution.

    With the acquisition of the South African business, we now have aproduction footprint to serve ice cream markets in sub-Saharan Africa.Following an acquisition, we typically make capital investments andimplement our best practices in order to bring such facilities in line withour group-wide standards.

    We benefit from a variety of licensed and owned brands, and we haveexclusive ice cream product licences with the worlds largest food company(Nestl), the worlds largest confectionery company (Mondelez, formerlyKraft Foods), and the worlds largest entertainment company (Disney).Strong private label relationships with our customers provide us with strongopportunities to cross-sell our branded products.

    In the UK, we produce under licence a number of products under Nestlsprominent confectionery brand names, including Smarties, KitKat, Milky Barand Lion Bar. We have an exclusive licence agreement with Mondelez toproduce and sell in the UK ice cream products under the Cadbury brandsthat include Dairy Milk, Crunchie, Cadbury Caramel and Marvellous Creations(which is a range of super-premium products).

    Across Europe, our exclusive licence agreement with Mondelez enables us toproduce and sell ice cream products under established brand names includingMilka, Oreo, Toblerone, Philadelphia and Daim. We also have non-exclusiveaccess to various Disney licences such as Mickey Mouse, Minnie Mouse and Cars. Note (a): See performance highlights table note on page 3 for definitions of these terms.

    Through the Peters acquisition in 2014, we have, amongst others, the iconicDrumstick, Connoisseur, and Peters Original brands in Australia. The SouthAfrica acquisition incorporated a number of similarly iconic brands(predominantly on an owned basis, rather than licensed) in South Africa andacross sub-Saharan Africa, such as Dairy Maid, Country Fresh, Tin Roof, KingCone, Jive and KitKat.

    Announcement of potential joint ventureOn 5 October 2015, we announced that R&R is in advanced discussions withNestl to set up a new joint venture covering ice cream based mainly inEurope and Africa. The proposed joint venture will capitalise on thecomplementary strengths and innovation expertise of the two companies.It will combine Nestls strong and successful brands and experience inout-of-home distribution with R&Rs competitive manufacturing model andsignificant presence in retail. At this stage, we have no further update on thepotential joint venture, and there is no effect in these financial statementsof the joint venture, aside from certain exceptional costs of 1.3 millionincurred in 2015 in relation to the ongoing project. A further announcementwill be made in due course, as appropriate.

    PERFORMANCE SUMMARYThe group has continued to deliver much improved trading results in 2015.Turnover increased to 991.6 million from 837.8 million (or to 958.7million excluding the post-acquisition results of R&R South Africa) andAdjusted EBITDA increased to 187.7 million from 140.0 million (or to185.4 million excluding the results of R&R South Africa).

    The increase year-on-year is partly as a result of the full year impact ofPeters (acquired in June 2014) and the post-acquisition results of SouthAfrica (acquired in May 2015). It also benefits from a substantialimprovement in trading across central and southern Europe across the 2015summer, efficiencies generated from further operational improvementsacross Europe and a change in mix towards branded products. The groupstrading performance has also benefited from the increase in the strength ofGBP to the Euro in the year, benefiting turnover by 25.7 million andAdjusted EBITDA by 6.0 million although the exchange rates of Australiaand South Africa were below budgeted levels.

    The group incurred substantial one-off and exceptional costs in 2013 and2014, as part of a substantial reshaping of the groups activities and financingstructure. Such exceptional costs reduced substantially in 2015, since themajority of the operational restructuring was conducted in earlier years.However, there has been a smaller amount of restructuring costs thatextended into 2015, though the greater part of exceptional costs in 2015relate to aborted refinancing costs (where the group explored refinancingopportunities) and the early stage costs in relation to the potential merger.

    PERFORMANCE HIGHLIGHTSA summary of the results and position of the group is presented below:

    2015 2014In thousands of euros 000 000Revenue 991,588 837,849

    Adjusted EBITDA(a) 187,738 139,979

    Adjusted EBITDA% 18.9% 16.7%

    Exceptional operating items (note 1) (7,473) (19,577)

    Capital expenditure (29,021) (26,667)

    Free cash flow before acquisitions and exceptional operating items(b) (page 15) 113,354 62,076




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    Note (a): EBITDA is defined as earnings before interest charges, taxation, depreciation and amortisation(including impairment charges). Adjusted EBITDA also excludes exceptional items and parentcompany/investor management charges. See note 3. In 2014, Adjusted EBITDA reflects the post-acquisition trading of Peters; and in 2015, reflects the post-acquisition trading of R&R South Africa.

    Note (b): Free cash flow before acquisitions and exceptional operating items is defined as net cash flowfrom operating and investing activities excluding the acquisitions of subsidiaries (net of cash acquired)and net cash outflows in respect of exceptional operating items. Free cash categorises PAI funding andgroup funding of PIK Toggle interest within financing cash flows.

    TURNOVERThe turnover of the group has increased by 153.8 million from 837.8million to 991.6 million, after taking account of favourable exchange ratemovements on GBP (of 27.7 million), with the 2015 average exchange rateof 1.3771EUR:1GBP used to translate the UK businesss performance, versus1.2406EUR:1GBP in 2014. When measured in constant currencies, therevenue growth is as a result of the post-acquisition revenue of South Africa(32.9 million), a full year effect of the Peters acquisition (made in June2014, with a positive effect of 87.1 million on 2015 results by incorporatinga full year of trading) and organic growth across our European business,particularly in Italy, and France.

    By operating segment:

    R&R UK revenues increased by 8.0 million, or 3.2% year-on-year, thoughthis includes a positive effect of a movement in our standard reportingexchange rate (14.2 million). The UK performed well in its branded offerand achieved improvements from some mix gains and more effectivepromotions. However, a poor summer of inclement weather across theUK for most of the season impacted the market: the UK market declinedby 0.9% in value terms in 2015, and by 2.6% in volumes and, typically,poorer weather sees a higher proportion of sales made on promotion.Nevertheless, the UK increased revenues through the growing discounterand convenience channels and in super-premium, which rose 8.3 millionat constant exchange rates.

    R&R France revenues have increased 3.8 million, or 2.2% year-on-year.This growth is largely due to an excellent trading performance in abuoyant market in the summer peak, especially across our Mondelez,Disney and Oasis licensed brands. R&R France also grew its contributionof owned brands, year-on-year; in Flipi and Pilpa.

    R&R Germany revenues decreased by 10.9 million, or 5.2% year-on-year.The reduction was expected, and is the result of the contract renewalsprocess, in the context of a very competitive German market, and theeffect of R&Rs withdrawal from certain tertiary brands and lower marginbusiness. However, the German summer season was very strong, and R&RGermany grew in its key areas of Mondelez, Landliebe and higher-marginprivate label business.

    R&R Italy revenues increased 10.5 million, or 11.1% year-on-year,predominantly in an excellent performance in a vibrant summer season,where R&R Italy outperformed a market that grew 6.5% in value terms.R&R Italy saw growth across its Mondelez and Del Monte business (in abranded business that nearly trebled, from a low base), and, moreparticularly, in private label in the discounters and large retailer channels.

    R&R Poland saw revenues decline 1.7 million, or 4.9% year-on-year,much of which was accounted for by reduced intra-group trading (down1.4 million), particularly with R&R Germany. However, there was animportant mix effect in Poland, with the share of Mondelez (and thebranded business generally) increasing substantially, despite a weaksummer in variable market conditions.

    R&R Australia saw revenues increase 100.3 million on a reportedoperating segment basis (i.e. at constant foreign exchange rates),

    87.1 million of which was the result of incorporating a full years resultsin 2015. The Australian business performed well in a relatively robustmarket, where a slow end to the 2014/2015 Australian summer seasonwas offset by a very strong start to the 2015/2016 summer season, whichhad a very positive effect on trading results in our fourth quarter. This wasparticularly prevalent in the retail channel, while the route (impulse)channel grew, though at a slower rate.

    R&R South Africa contributed post-acquisition revenues of 38.6 million(at a budgeted exchange rate), or 32.9 million at the average actual ratefor the post-acquisition period. This reflects eight months of trading,though around one-third of revenues were generated in December alone,as the South African market peaked, amidst a market that we estimatewas approximately 16.5% higher, December-on-December. The overalleffect of the South African acquisition will be to further de-seasonalisethe groups revenue and EBITDA patterns.

    ADJUSTED EBITDAThe Adjusted EBITDA of the group increased by 47.7 million (or 34.1%) to187.7 million from 140.0 million. The acquisition of R&R South Africacontributed an additional Adjusted EBITDA of 2.3 million to the group; andthe full year effect of incorporating the Peters business added a net 15.7million (including some exchange rate effects). Excluding the post-acquisitionperformance of R&R South Africa and the effect of a full year of Peters,Adjusted EBITDA increased by 29.7 million (or 21.2%) on a reported basis.

    Excluding exceptional items, impairments and amortisation, the groupsgross margin increased to 32.4% from 28.9%. This is due to a number oftrading factors, including:

    The consolidation of an additional six months trading of the high-marginPeters business in 2015 (Peters gross margin was 43.8% in 2015,substantially higher than margins in our European business, wheremargins, branded contribution and the cost base are lower);

    A greater share of branded sales across the group, which generallycontribute higher gross margins;

    Earnings growth as a result of the effect of sales growth, operationalefficiencies, the benefits of higher-margin NPD and change in mixtowards branded ranges;

    The effect of exchange rates, from translating into Euros the results ofour UK business from 2015 compared to 2014.

    In total, administrative and distribution expenses before exceptional itemsand amortisation increased by 35.1 million from 130.4 million to 165.5million. The acquisition of R&R South Africa has contributed an incremental7.3 million to administrative and distribution expenses in the eight monthspost-acquisition; and the full-year effect of consolidating a year of Petersresults contributed an additional 24.9 million of administrative anddistribution expenses. The remaining 2.8 million of additional administrativeand distribution expenses is mainly due to higher distribution costs incurredas activity levels were higher in our southern European markets and theeffect of exchange rates on the UKs cost base when translated into Euros.

    EXCEPTIONAL OPERATING ITEMSThe group has recognised 7.5 million (2014: 19.6 million) of exceptionaloperating items. These are set out in note 1 to the accounts. These largelycomprise: costs in relation to an aborted refinancing (1.5 million), earlystage costs in relation to the potential merger (1.3 million, included in one-off legal fees of 2.4 million) and acquisition costs, mainly in relation to theacquisition of R&R South Africa (total: 1.5 million).





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    CASH FLOWSWe generated 113.4 million of free cash flow before acquisitions andexceptional operating items in 2015, an increase of 51.3 million on 2014.This was driven by the underlying EBITDA growth of 47.7 million, togetherwith the impact, only in the 2014 financial year, of the part-year cash flowsrelated to working capital as the Australian business built working capitalbetween the date of acquisition and the year end (with a combined positiveeffect of working capital movements of 16.2 million); the effect of lowercash outflows from the settlement of exceptional items connected to previousrestructuring and similar projects; 8.4 million additional interest payments(largely driven by additional debt incurred in the acquisition of Peters, forwhich the 2014 figures only covered a six month period), 3.0 millionreduction in tax payments and 2.4 million additional capital expenditure.

    CAPITAL STRUCTUREDuring 2014, we refinanced our previous 350 million senior secured noteswith new 315 million senior secured notes and also raised 150 million andA$152 million senior secured notes to finance the acquisition of Peters.The refinancing resulted in a saving of 8.2 million on an annualised basis(versus the previous annual cost of the notes). The groups third party netdebt position at 31 December 2015 is 598.5 million, which incorporates oursenior secured loan notes, though excludes the 398.8 million loan with ourimmediate parent undertaking, offset by cash and liquid resources, thoughexcludes the PIK toggle notes which were issued by R&R PIK PLC, an indirectparent company. Based on Adjusted EBITDA for the year of 187.7 million, thegroup has a leverage ratio of 3.2 times, on its secured and unsecured financing.

    UNRESTRICTED SUBSIDIARIESIn May 2015, the Company acquired Nestls ice cream business in SouthAfrica for a total consideration of 8.6 million (from cash resources), whichincluded separate sums for the trade and assets of the business, and certainintellectual property (such as brand trademarks, patents and domain names).For the purposes of the Companys existing debt financing, including theindentures governing the Senior Secured Notes and Senior PIK Toggle Notesand Revolving Credit Facility Agreement, the South Africa subsidiary (R&R IceCream South Africa Pty Limited) is an unrestricted subsidiary under theagreements governing our existing debt financing and as a result are notbound by certain terms thereof. The Board believed that the optimal structurefor the acquisition was for this business to remain outside of the restrictedgroup, due to the inherent difference in the balance of risks and rewardsfrom activities in developing economies, such as in sub-Saharan Africa.

    A summary of the results and the groups position, split between theRestricted Group and Unrestricted Subsidiaries, is presented below:

    In thousands of euros Restricted Unrestricted 2015 Group Subsidiary TotalRevenue 958,703 32,885 991,588Adjusted EBITDA 186,207 1,531 187,738Total assets 1,179,512 24,699 1,204,211Net (liabilities)/assets (168,932) 5,463 (163,469)

    (Note: Adjusted EBITDA differs from the total adjusted EBITDA for R&R South Africa as a result ofroyalties charged on intellectual property from the Restricted Group to its Unrestricted Subsidiary.

    Net payments from the Restricted Group to the Unrestricted Subsidiarytotalled 9.8 million in the year ended 31 December 2015. There was noincome, expense or cash flow attributable to unrestricted subsidiaries for theyear ended 31 December 2014.

    The South African subsidiary is not a Significant Subsidiary as defined inthe indentures. The Company presents this analysis solely for the informationof its investors.

    LOOKING FORWARDOur goal is to strengthen our position as a leading global manufacturer ofice cream products and increase our profitability. Our strategy includes thefollowing elements:

    Drive Growth through Product InnovationNew product development continues to be a key growth driver of revenueacross both branded and retailer branded products. We will continue toleverage the success of Mondelez in France, Germany, Italy and Poland, aswell as the UK, particularly after the strong growth in these markets in2015. Across our markets, we are currently launching a number of excitingproduct innovations which we hope will contribute to significant revenuegrowth in 2016.

    Continue to Reduce Costs and Increase EfficiencyAfter the gains from factory consolidation in 2014, and particularly in 2015,we will continue to make targeted investments in order to drive efficiency andreduce our overhead base, all of which will help to deliver EBITDA growth.

    Pursue Selective Acquisition OpportunitiesWe plan to continue to evaluate acquisition opportunities to selectivelyacquire businesses that may improve our market share and product offerings,or allow us to enter new geographic markets. In May 2015, we completedthe acquisition of Nestl South Africas ice cream business. In addition, inOctober 2015, we announced that we are in advanced discussions withNestl to set up a new joint venture covering ice cream. A furtherannouncement will be made in due course, as appropriate.

    HEALTH & SAFETY AND ENVIRONMENTAL MATTERSWe maintain healthy and safe working conditions on all our sites, measuringagainst targets, our ability to keep staff and visitors safe. We review and aimto continuously improve all aspects of our working environments to ensureour staff and visitors have the safest occupational health and safety standardswe can provide. We aim to operate in an environmentally responsible manneracross all sites in the group, as we regard compliance with relevantenvironmental legislation and regulations as imperative, and the adoption ofresponsible standards where no legislation exists, as an integral part of ourbusiness strategy. Reports from across the group, are presented at ourmonthly board meetings covering health, safety and environmental matters,which include statistics on any accidents and progress in fulfilling targetslinked to continuous improvement, as well as promoting wider awareness ofenvironmental and safety to all employees and visitors. We carry out regularrisk management audits to identify areas for improvement, and to minimisesafety risks. The impact we make on the environment is important to us andwe are committed to continual improvement in environmental and pollutionprevention; this focus has enabled us to reduce our carbon footprint acrossthe group and to reduce the waste going to landfill to less than 2.5% annually.

    We recognise that our activities inevitably have an impact on theenvironment. To reduce this we set environmental objectives and targetsrelating to energy reduction (electricity, gas) and water and look to reduceour environmental footprint by reducing our use of energy and water, andreducing waste by prevention, reuse and recycling. These targets aremonitored and reviewed through KPIs.

    We have installed a combined heat and power plant in the UK as part of ourtarget to reduce energy costs and to increase the efficiency of our energyusage. We intend to install a similar system on other sites.

    In addition we work closely with our customers and brand partners in thedevelopment of our products and assessment of their health impacts,including fat, sugar and salt content. We purchase our raw materials from


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    sustainable sources and use recycled card and paper where possible. Health,safety and the environment is an area we continue to focus on within thecontext of the market sector we operate in including the development ofhealthier alternatives such as the use of natural juices and frozen yoghurt.

    SOCIAL AND COMMUNITY MATTERSWe strive to be a good corporate citizen recognising our responsibility towork in partnership with the communities in which we operate. Each yearwe donate a part of our profits to local charities as well as providingindirect giving in terms of free-of-charge products that charities andcommunities can use to raise funds and we also encourage active employeesupport for their community or chosen charities. As a business we haveselected two main charities that we support, with a strong focus on childrenand young people: Hope and Homes for Children which is an internationalcharity that aims to close orphanages and place children into family homesand The British Bobsleigh Youth programme which supported the youthtraining preparation for the February 2016 Youth Olympics. The business hasprovided our charities with donations totalling over 60,000 during the pastyear alone.

    BUSINESS ETHICSWe are committed to conducting our business in an ethically and sociallyresponsible attitude and treating employees, customers, suppliers andshareholders in a fair, open and honest manner. As a business we areregularly audited, by both independent auditors and by our customers;in addition we audit our supply chain to ensure that we are buying frombusinesses who operate in an ethically and socially responsible manner.We encourage staff feedback on any issues they are concerned about,operating an anonymous whistleblowing hotline that gives employees in allbusinesses around the group the chance to report anything they believe isnot meeting our exacting standards.

    EMPLOYEESThe group provides channels through which our employees can express viewsand communicate regularly with senior management of the business.We also have a number of employee consultative committees and workscouncils to provide a forum for our employees to air the views of theircolleagues and receive and discuss relevant issues. We conduct annual staffsurveys across the group, in order to ensure that the board and seniormanagers respond to employee feedback this engagement has resulted in avariety of initiatives being implemented which have aided the trust andengagement of employees with the business.

    The group is committed to training and development that improvesworkforce capabilities, skills and competencies. We recruit a large number ofyoung people across our business each year, and in many cases support theseyoung people through apprenticeships, work-based training or externalqualifications. We also develop our long-term succession planning by a talentmanagement programme.

    KEY PERFORMANCE INDICATORS (KPIs)In addition to the measures discussed in the performance summary andhighlights, there are a number of key performance indicators used across thegroup on a daily, weekly and monthly basis. These monitor performance ofthe operations compared to budget and forecast. The most significant ofthese are set out below:

    KPIs monitored on a daily basis are:

    Production volume

    Sales volume and value

    Order intake

    KPIs monitored weekly/monthly are the above plus:

    Sales margins

    Profit and cash generation

    Net debt

    Variances to standard cost

    Food safety and quality

    Health and safety

    Service levels

    Inventory levels

    Market share

    PRINCIPAL RISKS AND UNCERTAINTIESThe Directors of the group consider the potential impact of business risks atmonthly Board meetings. Actions to mitigate the risks are also discussed.The more significant risks and uncertainties faced by the group are set outbelow:

    Exchange rates. Given that the group reports in Euros, any strengtheningof the Euro relative to Pounds Sterling and/or the Australian dollar wouldadversely affect the contribution from the UK and/or Australia to groupprofitability. (There is also a similar risk, though substantially smaller, inrespect of the Polish Zloty.) Following the acquisition of R&R SouthAfrica, a corresponding risk also impacts the group in respect of the SouthAfrican Rand. With five currencies in the group, there is an element ofcurrency diversification, reducing the risk.

    Price and supply fluctuations. Whilst we look to hedge most of ourrequirements for a term of up to one year, any unhedged raw materials,including dairy which we can potentially only partially hedge, may presentadditional cost.

    Acquisition strategies. Whilst we undertake detailed due diligence aheadof any acquisition, there is the potential that acquisitions may expose us toadditional unforeseen risk.

    Fire or significant damage to a factory. Whilst production can be switchedto other sites across the group, any significant damage to a factory unitwill cause short-term disruption.

    Seasonality. The ice cream market is characterised by fluctuations in sales,although these largely equalise out over the course of a year. Ice creamsales are inextricably linked with the seasons and therefore any climatechanges have the potential to impact on business. The group has partlyde-seasonalised through our southern hemisphere acquisitions to date.

    Competition in the ice cream industry. The group operates in highlycompetitive markets, often competing with substantial multinationalbusinesses, and with large, profitable retail customers and its failure tocompete effectively could result in a material adverse effect on its results.

    Economic conditions. The group derives the majority of its profits fromsales activity in Germany, France, Italy, the UK and Australia. It is thereforesensitive to fluctuations in the economic conditions of these countries.

    The Board has strategies to manage these risks and remains confident in thegroups ability to mitigate any significant effect.

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    FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVESThe group finances its activities with a combination of loan notes,shareholder loan notes, debt factoring, cash and revolving credit facilities.Other financial assets and liabilities arise directly from the groups operatingactivities. The main risks associated with the groups financial assets andliabilities are set out as below:

    The groups functional currency is the Euro. Its UK operation buys certaingoods and sells almost all goods denominated in Sterling. Similarly, theAustralian operation buys certain goods and sells almost all goodsdenominated in Australian dollars. As a result the value of the groupsSterling and Australian dollar revenues, purchases, financial assets andliabilities and cash flows can be affected significantly by movements in theSterling and Australian dollar exchange rates. To a lesser extent, due tothe smaller size of the Polish and South African businesses, this is alsotrue of the Zloty and South African Rand.

    The groups loan notes are denominated and serviced in Euros, Sterlingand Australian dollars; whilst the group believes that it has put in place aneffective hedging strategy with regard to those liabilities, there remainsthe risk of mismatch between the underlying cash flows, assets andliabilities of the groups trading subsidiaries and the groups loan noteliabilities and debt servicing obligations.

    The shareholder loan notes are denominated in Euros and bear interest atfixed rates. Consequently, there is no foreign exchange risk or interest raterisk on these instruments.

    The group aims to mitigate liquidity risk by managing cash generation by itsoperations and applying cash collection targets throughout the group.Investment is carefully controlled, with authorisation limits operating up togroup Board level.

    Further details of the groups risk management policy, including hedgingpolicies, are provided on pages 16 and 33 of the annual report.

    By order of the Board

    A FinneranSecretary29 February 2016

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    OWNERSHIP AND BOARD OF DIRECTORSThe group is majority-owned by funds held by, or advised by, PAI PartnersSAS (PAI), a private equity firm headquartered in Paris, France.

    PAI is one of the oldest and most experienced private equity firms in Europewith its origins dating back to Paribas Affaires Industrielles, the historicalprincipal investment activity of Paribas, the pan-European merchant bank,which merged with BNP in 1999.

    PAI has invested in the group via a corporate structure in Luxembourg. Ourultimate parent undertaking is Riviera Topco Sarl which controls 100% of theshares of R&R Ice Cream plc via a number of intermediate parent companies.

    Riviera Topco Sarl acquired R&R Ice Cream plc via a UK holding companystructure of which Riviera Topco Limited is the ultimate UK parent.

    BOARD OF DIRECTORSThe Board is responsible for the overall operations of the group, includingthe final approval of the strategic plan, annual budget, changes to thegroups financing arrangements, acquisitions and disposals, material contractsand significant capital expenditure.

    During the year, the Board comprised the following Directors:

    Ibrahim Najafi Chief Executive OfficerAndy Finneran Chief Financial Officer and Company SecretaryOversight is provided by the Board of a parent company (Riviera TopcoLimited), which is represented by:Ian Fraser Non-Executive Director of Riviera Topco Limited (Chairman)Colm OSullivan PAI representativeFrdric Stvenin PAI representativeGalle dEngremont PAI representativeChristopher Afors PAI representativeEugenio Minvielle Non-Executive Director of Riviera Topco Limited (resigned 31 December 2015)

    Ibrahim Najafi has served as our Chief Executive Officer since July 2013 andwas previously European Chief Executive Officer and Group Chief OperatingOfficer from June 2009 and 2006, respectively. Prior to that, Mr Najafiserved as Richmonds operations director from 1999 to 2007 and as thefactory manager at Richmonds Leeming Bar site from 1998 to 1999. Prior tothat, Mr Najafi served in various factory management roles in the chilledfoods sector.

    Andy Finneran has served as our Chief Financial Officer and Secretary sinceour inception. Mr Finneran held a similar position at Richmond from 1995 to2005. Prior to that, Mr Finneran served as Treats head of accounting andfinance. Mr Finneran qualified as a chartered accountant (ACA) in 1984.

    Ian Fraser was appointed Non-Executive Chairman of the Board on 9October 2014. Mr Fraser is a board member at German auto parts retailerand service provider ATU, and Chairman of the Priory Group until February2016. He was a Non-Executive Director and Chairman of the AuditCommittee at Punch Taverns from 2004 to 2012. Mr Fraser was previouslyTrading Director at Safeway, COO of Orange UK, CEO of Enterprise Groupand CEO of the automotive specialist Kwik Fit.

    Colm OSullivan joined PAI in 2006 and since 2008 he has headed PAIs UKoffice. Mr OSullivan was previously at Deutsche Bank where he spent eightyears in the Financial Sponsors group. Prior to this, he spent six years withHambros Bank. He is also currently a non-executive director of VPS and CST.

    Frdric Stvenin joined PAI in 1993 and is responsible for the Food &Consumer Goods and Healthcare sector teams. In 1998, he joined DeutscheBank/Bankers Trust before returning to PAI in June 2011. Prior to this, MrStvenin spent four years with Banque Paribas. He is also a non-executivedirector of Chr. Hansen, Cerba and Marcolin.

    Galle dEngremont joined PAI in 2004 and is a member of the Food &Consumer Goods sector team. Prior to this, Mme. dEngremont worked forfour years with Casino and two years with Unibail.

    Christopher Afors joined PAI in 2008. He has been involved in a number oftransactions including United Biscuits, R&R Ice Cream and VPS. Prior to2008, Mr Afors spent five years with JPMorgan in London working in theM&A and Equity Capital Markets teams.

    EXECUTIVE TEAM AND MANAGEMENT BOARDThe Executive team and management board is responsible for the day-to-dayoperations of the group and the development of the groups businessstrategy and plans for consideration by the Board.

    The Executive team and management board comprises the Chief ExecutiveOfficer and Chief Financial Officer, as well the following individuals:

    Philip Griffin Chief Marketing Officer

    Pietro Monaco Chief Operations Officer

    Peter Pickthall Human Resources Director (retired 31 December 2015)

    Neil Millan European HR and Group Talent Director

    Sam Wrist Integration Director

    Michael Fraine Country Head - UK

    Fabrice Ducasse Country Head - France

    Gotthard Kirchner Country Head - Germany

    Antonio Mazzezi Country Head Italy

    Zbigniew Dysko Country Head Poland

    Stephen Audsley Country Head Australia

    Mr Pickthall, who joined the senior management team in 2001, has taken upretirement at the end of the year and his role as HR Director will be takenup by Mr Millan. The Board wishes to place on record its thanks to MrPickthall for his service and commitment to the group over the last 15 years,as the groups first HR director.

    BOARD COMMITTEESThe Audit Committee and Remuneration Committee at a Riviera TopcoLimited level have oversight of the governance of the group.

    AUDIT AND RISK COMMITTEEThe Audit and Risk Committee consists of Colm OSullivan, GalledEngremont, Christopher Afors and the Chairman, all of whom are on theBoard of Directors of Riviera Topco Limited. It is chaired by Ian Fraser.

    The committee meets at least three times a year, at appropriate times in thereporting and audit cycle. In addition, the committee meets at such othertimes as the Board or the committee Chairman requires, or if requested bythe groups external auditor. Only committee members have the right toattend meetings but, in practice, other individuals, including members of thegroup board and other members of the senior finance team are invited toattend all or part of meetings as and when appropriate to their area ofexpertise. The external auditor also attends certain meetings.

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    The committees responsibilities include overseeing the relationship with theexternal auditor. It meets with them regularly, reviews the audit plan anddiscusses audit findings with them. The committees responsibilities alsoinclude the evaluation of managements risk framework and communicatingthe importance of internal control and the management of risk.

    The group changed its auditor from KPMG to PricewaterhouseCoopersfollowing a competitive tender overseen by the Audit Committee. KPMGhas been the groups auditor since 1998 and the Board wishes to thankKPMG for its service during that period.

    REMUNERATION COMMITTEEThe Remuneration Committee consists of Colm OSullivan, Frdric Stveninand Ian Fraser, all of whom are on the Board of Directors of Riviera TopcoLimited. It is chaired by Colm OSullivan.

    The committee meets at least twice a year and also at such other times asrequired. Only committee members have the right to attend meetings, butother individuals are invited to attend from time to time, when appropriate.

    The committees responsibilities include determining and agreeing theannual remuneration of the executive directors and approving the design ofthe groups annual incentive plans.

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    The Directors present their report and the audited group financialstatements for the year ended 31 December 2015.

    FUTURE DEVELOPMENTS Future developments for the group and the risks and uncertainties facing thebusiness can be found in the strategic report.

    DIVIDENDS The Directors do not recommend the payment of a dividend (2014: nil).

    RESEARCH AND DEVELOPMENT There are ongoing research and development projects at each of the groupslocations, primarily concentrated on new ice cream design and recipes.

    EMPLOYEESThe group operates a framework for employee information and consultationin line with the Information and Consultation of Employees Regulations2004. Throughout the year the group issues information on its website. InGermany the group works closely with the Works Council and complies withBetriebsverfassungsgesetz (BetrVG) (works constitution act). Further detailsof our employee involvement schemes are included within the StrategicReport.

    The group gives full consideration to applications for employment fromdisabled persons where the candidate displays particular aptitudes andabilities are consistent with adequately meeting the requirements of the job.Opportunities are available to disabled employees for training, careerdevelopment and promotion. We seek to continue the employment of, andarrange appropriate training for, any of the group employees who havebecome disabled during the period in which the group employed them.


    The Directors who served during the year are as follows:

    Ibrahim Najafi

    Andy Finneran

    As permitted by the Articles of Association, each of the Directors has thebenefit of an indemnity, which is a qualifying third-party indemnity asdefined by Section 234 of the Companies Act 2006. The indemnity was inforce throughout the tenure of each Director during the year, and iscurrently in force. The Company also maintains Directors and Officersliability insurance in respect of itself and its Directors. No indemnity isprovided for the Companys auditors.

    FINANCIAL RISK MANAGEMENT Please see the Strategic Report.

    INDEPENDENT AUDITORSIn November 2015, following a competitive tender overseen by the AuditCommittee, the Company changed its auditors from KPMG LLP toPricewaterhouseCoopers LLP. In accordance with Section 487 of theCompanies Act 2006, a resolution to reappoint PricewaterhouseCoopersLLP as auditors will be put to the members at the Annual General Meeting.

    DIRECTORS STATEMENT AS TO DISCLOSURE OF INFORMATION TOTHE AUDITORSThe Directors who were members of the Board at the time of approving theDirectors Report are listed on page 7. Having made enquiries of fellowDirectors and of the companys auditors, each of these confirms that:

    to the best of each Directors knowledge and belief, there is noinformation relevant to the preparation of their report of which thecompanys auditors are unaware; and

    each Director has taken all the steps a Director might reasonably beexpected to have taken to be aware of relevant audit information and toestablish that the companys auditors are aware of that information.

    By order of the Board

    A FinneranSecretary29 February 2016

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    The Directors are responsible for preparing the Annual Report and thegroup and parent company financial statements in accordance withapplicable law and regulations.

    Company law requires the Directors to prepare group and parent companyfinancial statements for each financial year. Under that law they have electedto prepare the group financial statements in accordance with IFRSs asadopted by the EU and applicable law and have elected to prepare theparent company financial statements in accordance with UK AccountingStandards and applicable law (UK Generally Accepted Accounting Practice),including Financial Reporting Standard 101 Reduced Disclosure Framework(FRS101).

    Under company law the Directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state ofaffairs of the group and parent company and of the groups profit or loss forthat period.

    In preparing each of the group and parent company financial statements, theDirectors are required to:

    select suitable accounting policies and then apply them consistently;

    make judgements and estimates that are reasonable and prudent;

    for the group financial statements, state whether they have been preparedin accordance with IFRSs as adopted by the EU;

    for the parent company financial statements, state whether applicable UKAccounting Standards, including FRS101, have been followed, subject toany material departures disclosed and explained in the financialstatements;

    Notify its shareholders in writing about the use of disclosure exemptions,if any, of FRS101 used in the preparation of the financial statements: and

    prepare the financial statements on the going concern basis unless it isinappropriate to presume that the group and the parent company willcontinue in business.

    The Directors are responsible for keeping adequate accounting records thatare sufficient to show and explain the parent company's transactions anddisclose with reasonable accuracy at any time the financial position of theparent company and enable them to ensure that its financial statementscomply with the Companies Act 2006. They have general responsibility fortaking such steps as are reasonably open to them to safeguard the assets ofthe group and to prevent and detect fraud and other irregularities.

    The Directors are responsible for the maintenance and integrity of thecorporate and financial information included on the companys website.Legislation in the UK governing the preparation and dissemination offinancial statements may differ from legislation in other jurisdictions.

    By order of the Board

    A FinneranSecretary29 February 2016

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    REPORT ON THE FINANCIAL STATEMENTSOur opinionIn our opinion:

    R&R Ice Cream plcs group financial statements and company financialstatements (the financial statements) give a true and fair view of thestate of the groups and of the companys affairs as at 31 December 2015and of the groups profit and cash flows for the year then ended;

    the group financial statements have been properly prepared in accordancewith International Financial Reporting Standards (IFRSs) as adopted bythe European Union;

    the company financial statements have been properly prepared inaccordance with United Kingdom Generally Accepted Accounting Practice;and

    the financial statements have been prepared in accordance with therequirements of the Companies Act 2006.

    What we have auditedThe financial statements, included within the Annual Report, comprise:

    the consolidated income statement and consolidated statement ofcomprehensive income for the year then ended;

    the consolidated statement of changes in equity for the year then ended;

    the consolidated statement of financial position as at 31 December 2015;

    the consolidated statement of cash flows for the year then ended;

    the company only statement of financial position as at 31 December 2015;

    the statement of changes in equity for the year then ended;

    the accounting policies; and

    the notes to the financial statements, which include other explanatoryinformation.

    The financial reporting framework that has been applied in the preparation ofthe group financial statements is applicable law and IFRSs as adopted by theEuropean Union. The financial reporting framework that has been applied inthe preparation of the company financial statements is applicable law andUnited Kingdom Accounting Standards (United Kingdom Generally AcceptedAccounting Practice), including FRS 101 Reduced Disclosure Framework.

    In applying the financial reporting framework, the Directors have made anumber of subjective judgements, for example in respect of significantaccounting estimates. In making such estimates, they have made assumptionsand considered future events.


    the information given in the Strategic Report and the Directors Reportfor the financial year for which the financial statements are prepared isconsistent with the financial statements.

    OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BYEXCEPTIONAdequacy of accounting records and information and explanations receivedUnder the Companies Act 2006 we are required to report to you if, in ouropinion:

    we have not received all the information and explanations we require forour audit; or

    adequate accounting records have not been kept by the company, orreturns adequate for our audit have not been received from branches notvisited by us; or

    the company financial statements are not in agreement with theaccounting records and returns.

    We have no exceptions to report arising from this responsibility.

    Directors remunerationUnder the Companies Act 2006 we are required to report to you if, in ouropinion, certain disclosures of Directors remuneration specified by law arenot made. We have no exceptions to report arising from this responsibility.

    RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDITOur responsibilities and those of the DirectorsAs explained more fully in the Directors' Responsibility Statement, theDirectors are responsible for the preparation of the financial statements andfor being satisfied that they give a true and fair view.

    Our responsibility is to audit and express an opinion on the financialstatements in accordance with applicable law and International Standards onAuditing (UK and Ireland) (ISAs (UK & Ireland)). Those standards require usto comply with the Auditing Practices Boards Ethical Standards for Auditors.

    This report, including the opinions, has been prepared for and only for thecompanys members as a body in accordance with Chapter 3 of Part 16 ofthe Companies Act 2006 and for no other purpose. We do not, in givingthese opinions, accept or assume responsibility for any other purpose or toany other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.

    What an audit of financial statements involvesWe conducted our audit in accordance with ISAs (UK & Ireland). An auditinvolves obtaining evidence about the amounts and disclosures in thefinancial statements sufficient to give reasonable assurance that the financialstatements are free from material misstatement, whether caused by fraud orerror. This includes an assessment of:

    whether the accounting policies are appropriate to the groups and thecompanys circumstances and have been consistently applied andadequately disclosed;

    the reasonableness of significant accounting estimates made by theDirectors; and

    the overall presentation of the financial statements.

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    We primarily focus our work in these areas by assessing the Directorsjudgements against available evidence, forming our own judgements, andevaluating the disclosures in the financial statements.

    We test and examine information, using sampling and other auditingtechniques, to the extent we consider necessary to provide a reasonablebasis for us to draw conclusions. We obtain audit evidence through testingthe effectiveness of controls, substantive procedures or a combination ofboth.

    In addition, we read all the financial and non-financial information in theAnnual Report to identify material inconsistencies with the audited financialstatements and to identify any information that is apparently materiallyincorrect based on, or materially inconsistent with, the knowledge acquiredby us in the course of performing the audit. If we become aware of anyapparent material misstatements or inconsistencies we consider theimplications for our report.

    Ian Morrison (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLeeds

    29 February 2016

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    For the year ended 31 December 2015In thousands of euros Before exceptional items, Exceptional items, Before exceptional items, Exceptional items, amortisation, amortisation, amortisation, amortisation, Restated(b) impairment and impairment and 2015 impairment and impairment and 2014 Note non-cash interest non-cash interest(a) Total non-cash interest non-cash interest(a) Total

    Revenue 4 991,588 - 991,588 837,849 - 837,849Cost of sales (670,369) - (670,369) (596,031) (7,228) (603,259)

    Gross profit 321,219 - 321,219 241,818 (7,228) 234,590

    Distribution expenses (78,773) - (78,773) (63,281) (415) (63,696)Administrative expenses (86,707) (28,338) (115,045) (67,104) (25,281) (92,385)

    Results from operating activities 6 155,739 (28,338) 127,401 111,433 (32,924) 78,509

    Finance income 528 3,171 3,699 333 337 670Finance expenses (43,729) (44,629) (88,358) (36,258) (70,535) (106,793)Net finance costs 9 (43,201) (41,458) (84,659) (35,925) (70,198) (106,123)

    Profit/(loss) before income tax 112,538 (69,796) 42,742 75,508 (103,122) (27,614)Income tax charge 10 (9,406) (6,635)Profit/(loss) from continuing operations 33,336 (34,249)

    Attributable to:Equity holders of the company 33,336 (34,249)Non-controlling interests - -Profit/(loss) for the year 33,336 (34,249)

    Note (a): in order to aid understanding of the financial results, the Directors have presented additional analysis to illustrate the effect of exceptional items, amortisation and impairment of intangible assets andnon-cash interest charges. These items are analysed in detail in note 1.

    Note (b): Cost of sales and distribution costs in 2014 have been restated to reclassify 11.8 million of distribution related costs from cost of sales to distribution expenses.

    The notes on pages 16 to 37 are an integral part of these consolidated financial statements.

    All operations are continuing.

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    For the year ended 31 December 2015In thousands of euros 2015 2014

    Profit/(loss) for the year 33,336 (34,249)

    Other comprehensive income/(expense)Items that are or may be reclassified to profit or lossExchange differences on retranslation of foreign operations 4,561 7,402Net investment hedging (8,696) (6,899) (4,135) 503Items that will never be reclassified to profit or lossChange in actuarial assumptions in respect of post-employment benefits 57 (647)

    Total other comprehensive expense for the year (4,078) (144)Total comprehensive income/(expense) for the year 29,258 (34,393)


    For the year ended 31 December 2015In thousands of euros Equity Currency Accumulated Total share translation losses equity capital reserve

    Balance at 1 January 2014 50,886 (17,644) (191,576) (158,334)

    Comprehensive expense for the year Loss for the year - - (34,249) (34,249)Exchange differences onretranslation of foreign operations - 7,402 - 7,402Net investment hedging - (6,899) - (6,899)Change in actuarial assumptions in respect of post-employment benefits - - (647) (647)Total comprehensive incomefor the year - 503 34,896 34,393Balance at 31 December 2014 50,886 (17,141) (226,472) (192,727)

    Comprehensive expense for the year Profit for the year - - 33,336 33,336Exchange differences onretranslation of foreign operations - 4,561 - 4,561Net investment hedging - (8,696) - (8,696)Change in actuarial assumptions in respect ofpost-employment benefit schemes - - 57 57Total comprehensive incomefor the year - (4,135) 33,393 29,258Balance at 31 December 2015 50,886 (21,276) (193,079) (163,469)


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    As at 31 December 2015In thousands of eurosAssets Note 2015 2014

    Non-current assets Property, plant and equipment 12 202,339 202,004Intangible assets 13 607,612 607,382Deferred tax assets 14 21,270 19,006Total non-current assets 831,221 828,392

    Current assets Inventories 15 94,618 88,205Current tax assets 780 3,127Trade and other receivables 16 168,488 131,899Cash and cash equivalents 17 108,676 36,012 372,562 259,243Assets classified as held for sale 428 436Total current assets 372,990 259,679

    Total assets 1,204,211 1,088,071

    Equity and liabilities

    Equity Equity share capital 18 50,886 50,886Currency translation reserve 18 (21,276) (17,141)Accumulated losses 18 (193,079) (226,472)Total equity attributable to owners of the company (163,469) (192,727)

    Non-current liabilities Financial liabilities 20 1,084,799 1,027,727Deferred tax liabilities 14 17,479 20,547Provisions 23 4,741 4,137Total non-current liabilities 1,107,019 1,052,411

    Current liabilities Financial liabilities 20 5,543 6,102Trade and other payables 22 244,555 214,232Current tax liabilities 3,914 135Provisions 23 6,649 7,918Total current liabilities 260,661 228,387

    Total liabilities 1,367,680 1,280,798

    Total equity and liabilities 1,204,211 1,088,071

    These financial statements were approved by the Board of Directors on 29February 2016 and were signed on its behalf by:

    I NajafiDirector

    Company number: 05777981

    For the year ended 31 December 2015In thousands of euros Note 2015 2014

    Cash flows from operating activities

    Adjusted EBITDA 3 187,738 139,979Adjustments for exceptional items andmanagement charges 3 (8,108) (20,377)Operating cash flow before changesin working capital and provisions 3 179,630 119,602

    (Increase)/decrease in inventories (3,325) 1,396Increase in trade and other receivables (8,266) (21,885)Increase in trade and other payables 22,139 22,179Decrease in provisions (1,591) (7,797)Cash generated from operations 188,587 113,495

    Interest paid (43,605) (35,174)Income tax paid (7,266) (10,240)Net cash generated from operatingactivities 137,716 68,081

    Cash flows from investing activities Interest received 528 333Proceeds from sale of property, plantand equipment 6 2,857Acquisition of subsidiaries,net of cash acquired (Note (a)) 11 (10,306) (305,767)Acquisition of property, plant andequipment 12 (29,021) (26,666)Acquisition of intangible assets 13 (2,505) (353)Net cash used in investing activities (41,298) (329,596)Net cash flow generated/(used) inoperating and investing activities 96,418 (261,515)

    Cash flows from financing activities Redemption of 350 million senior secured notes 20 - (373,274)Proceeds from issue of senior secured notes 20 - 639,883Net unrealised foreign exchange losses related to /A$ senior secured notes (non-cash) - (10,400)Transaction costs related to refinancing 20 - (12,621)Parent company funding - 64,739Funding of parent undertakings external PIK Toggle loan note interest (23,403) (23,403)Repayment of borrowings - (1,747)Repayment of finance lease liabilities 21 (799) (1,267)Net cash (used)/from financingactivities (24,202) 281,910

    Net increase in cash and cashequivalents 72,216 20,395Cash and cash equivalents at 1 January 36,012 12,568Effect of exchange rate fluctuationson cash held 448 3,049Cash and cash equivalents at31 December 17 108,676 36,012

    Memorandum:Net cash flow from operating and investing activities 96,418 (261,515)Acquisition of subsidiaries,net of cash acquired (Note (a)) 10,306 305,767Exceptional operating items cash flows 6,630 17,824Free cash flow before acquisitions and exceptional operating items 113,354 62,076

    Note (a): Payments included 8.6 million in respect of the acquisition of South Africa and 1.7 milliondeferred consideration in respect of Durigon.



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    GENERAL INFORMATIONR&R Ice Cream plc is a public limited company incorporated and domiciled inthe UK. The address of the companys registered office is Richmond House,Plews Way, Leeming Bar Industrial Estate, Northallerton, North Yorkshire,DL7 9UL. The group is primarily involved in the manufacture and sale of icecream and ice cream related products.The consolidated financial statements of the company as at and for the yearended 31 December 2015 comprise the company and its subsidiaries.BASIS OF PREPARATIONThe consolidated financial statements have been prepared and approved bythe Directors in accordance with International Financial Reporting Standardsas adopted by the European Union (IFRSs) and the Companies Act 2006applicable to companies reporting under IFRS. The parent company accountsare presented on pages 38 to 41. The consolidated financial statements havebeen prepared on the historical cost basis except for the revaluation of certainfinancial instruments.The IFRS accounting policies set out below have been applied consistentlyunless otherwise stated to all periods presented in these consolidatedfinancial statements. The accounting policies have been prepared on the basisof the requirements of IFRSs in issue and adopted by the EU and effective at31 December 2015.GOING CONCERNAt 31 December 2015, the group has consolidated net liabilities of 163.5million (2014: 192.7 million). Net liabilities are typical in private equity backedbusinesses such as the group, largely due to the financing structure adoptedand the rolling up of non-cash interest on parent company loans, which is notpayable until 2110 at the earliest. In addition, included in current liabilities is61.6 million (2014: 63.7 million) of interest free loans from parentcompanies which, although repayable on demand, in reality are not repayableuntil the exit of PAI Partners SAS. Excluding these current liabilities, thegroup has net current assets of 173.5 million (2014: 95.0 million). In 2014,the business refinanced, securing loan notes providing certainty over futureinterest charges until 2020. The Directors believe that the reduced rates arecompetitive and reduce the exposure of the business to increases in interestrates for the medium term to almost zero. This gives the Board furthercomfort as to the groups going concern status, understanding the relatedcash requirements and the lack of additional unknown risk.The Directors have considered this position, together with the groupsbudgets and positive net current assets position, and after making appropriateenquiries, the Directors consider that the group has adequate resources tocontinue in operational existence for the foreseeable future and thereforecontinue to adopt the group going concern basis for the preparation of thefinancial statements.BASIS OF CONSOLIDATIONBusiness combinationsThe group accounts for business combinations using the acquisition methodwhen control is transferred to the group. Subsidiaries are entities controlledby the group. The group controls an entity when it is exposed to, or has rightsto, variable returns from its involvement with the entity and has the ability toaffect those returns through its power over the entity. In assessing control,the group takes into consideration potential voting rights that are currentlyexercisable. The acquisition date is the date on which control is transferred tothe acquirer. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control commences untilthe date that control ceases.The accounting policies of subsidiaries have been changed when necessary to

    align them with the policies adopted by the group. Losses applicable to thenon-controlling interests in a subsidiary are allocated to the non-controllinginterests even if doing so causes the non-controlling interests to have adeficit balance.The consideration transferred in an acquisition is generally measured at fairvalue, as are the identifiable net assets acquired. Any goodwill that arises istested annually for impairment. Any gain on a bargain purchase is recognisedin profit or loss immediately. Transaction costs are expensed as incurred,except if related to the issue of debt or equity securities.The consideration transferred does not include amounts related to thesettlement of pre-existing relationships. Such amounts are generallyrecognised in profit or loss.Any contingent consideration is measured at fair value at the date ofacquisition. If an obligation to pay contingent consideration that meets thedefinition of a financial instrument is classified as equity, then it is notremeasured and settlement is accounted for within equity. Otherwise,subsequent changes in the fair value of contingent consideration arerecognised in profit or loss.If share-based payment awards (replacement awards) are required to beexchanged for awards held by the acquirees employees (acquirees awards),then all or a portion of the amount of the acquirers replacement awards isincluded in measuring the consideration transferred in the businesscombination. This determination is based on the market-based measure of thereplacement awards compared with the market-based measure of theacquirees awards and the extent to which the replacement awards relate topre-combination service.Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income andexpenses arising from intra-group transactions, are eliminated. Unrealisedgains arising from transactions with equity-accounted investees are eliminatedagainst the investment to the extent of the groups interest in the investee.Unrealised losses are eliminated in the same way as unrealised gains, but onlyto the extent that there is no evidence of impairment.Foreign currencyThe functional currency of each group company is the currency of the primaryeconomic environment in which the group company operates.The financial statements are presented in Euros which is the presentationalcurrency of the group.Transactions denominated in foreign currencies are translated into thefunctional currency of each group company at the exchange rate ruling at thedate of the transaction. Monetary assets and liabilities denominated in foreigncurrencies are translated into Euros at the rate of exchange ruling at thebalance sheet date. Foreign exchange gains and losses arising on thesettlement of such transactions and translation of monetary assets andliabilities are recognised in the income statement.On consolidation, the financial statements of subsidiaries with a functionalcurrency other than Euro are translated into Euros as follows: The assets and liabilities in their balance sheets plus any goodwill aretranslated at the rate of exchange ruling at the balance sheet date.

    The income statements and cash flow statements are translated at theaverage rate of exchange for the year.

    Currency translation movements arising on the translation of the netinvestments in foreign subsidiaries are recognised in the currencytranslation reserve, which is a separate component of equity.


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  • Hedge of a net Investment in foreign operationThe group applies hedge accounting to foreign currency differences arisingbetween the functional currency of the net assets of the UK and Australianoperations and the groups functional currency (Euro).

    To the extent that the hedge is effective, foreign currency differences arisingon the translation of a financial liability designated as a hedge of a netinvestment in a foreign operation are recognised in and accumulated in thecurrency translation reserve; any remaining differences are recognised inprofit or loss. When the hedged net investment is disposed of, the relevantamount in the translation reserve is transferred to profit or loss as part of thegain or loss on disposal.

    OTHER ACCOUNTING POLICIESRevenueRevenue from the sale of goods is measured at the fair value of theconsideration received or receivable, net of returns and allowances, tradediscounts and volume rebates. Revenue is recognised when the significantrisks and rewards of ownership have been transferred to the buyer (which iswhen the goods are despatched), recovery of the consideration is probable,the associated costs and possible return of goods can be estimated reliably,and there is no continuing management involvement with the goods.

    TaxationIncome tax on the profit or loss for the year comprises current and deferredtax. Income tax is recognised in the income statement except to the extentthat it relates to items recognised directly in equity, in which case it isrecognised in equity.

    Deferred tax is recognised using the balance sheet method, providing fortemporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and the amounts used for taxation purposes.Deferred tax is not recognised for the following temporary differences: theinitial recognition of goodwill, the initial recognition of assets or liabilities ina transaction that is not a business combination and that affects neitheraccounting nor taxable profit, and differences relating to investments insubsidiaries and jointly controlled entities to the extent that they probablywill not reverse in the foreseeable future. The amount of deferred taxprovided is based on the carrying amount of assets and liabilities, using theprevailing tax rates. The deferred tax balance has not been discounted.

    Current tax is the expected tax payable on the taxable income for the year,using prevailing tax rates enacted or substantively enacted at the reportingdate, and any adjustment to tax payable in respect of previous years.

    Employee benefitsObligations for contributions to defined contribution pension plans arerecognised as an expense in the income statement when they are due.

    The group recognises within provisions its obligations in respect of Frenchretirement benefits; Italian termination benefits; Australian employee longservice leave; and in South Africa, the group acquired provisions in respect ofpost-retirement medical benefits for certain employees and, in additioncertain employees are members of the Nestl South Africa defined benefitpension scheme, for which R&R South Africa are required to contribute.

    In general the obligations in respect of the groups benefits in respect ofthese provisions are calculated based on future benefits earned in return fortheir service in current and prior periods, discounted to present value.The discount rate is the yield at the reporting date on AA credit-rated bondsthat have maturity dates approximating the terms of the groups obligations.Any actuarial gains or losses are recognised directly in equity.

    Share-based paymentsFor cash settled share-based payment transactions, the fair value of theamount payable to the employee is recognised as an expense with acorresponding increase in liabilities. The fair value is initially measured at grantdate and spread over the period during which the employees becomeunconditionally entitled to payment. The fair value is measured based on anoption pricing model taking into account the terms and conditions uponwhich the instruments were granted. The liability is revalued at each balancesheet date and settlement date with any changes to fair value beingrecognised in the Consolidated income statement.For equity settled share-based payment transactions, the fair value of theamount payable to the employee is measured at the date of grant and isrecognised as an expense with a corresponding increase in equity. The fairvalue is based on an option pricing model taking into account the terms andconditions upon which the instruments were granted.Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulateddepreciation and impairment losses.Depreciation on property, plant and equipment is provided using the straightline method to write off the cost less any estimated residual value, as follows: Land nil depreciation nil depreciation Buildings 40-50 years 2%-2.5% Plant and equipment 3-15 years 6.67%-33.33%Depreciation methods, useful lives and residual values are reassessed at thereporting date.Leased assets Assets financed by means of a finance lease are treated as if they had beenpurchased outright and the corresponding liability to the leasing company isincluded as an obligation under finance leases. Depreciation on such assets ischarged to the income statement, in accordance with the stated accountingpolicy, over the shorter of the lease term or the asset life. The financeelements of payments to leasing companies are calculated so as to achieve aconstant rate of interest on the remaining balance over the lease term, andcharged to the income statement accordingly.Amounts payable under operating leases are charged to operating expenseson a straight line accruals basis over the lease term.Intangible assetsAn intangible asset acquired as part of a business combination is recognisedoutside of goodwill if the assets are separable or arises from contractual orother legal rights and its fair value can be measured reliably. Following initialrecognition, the historic cost model is applied, with intangibles being carriedat cost less accumulated amortisation and impairm