2017 annual report · consolidated statement of changes in equity 31 consolidated statement of cash...

2 017 A N N UA L R EPO RT

AUDITED FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORT 25CONSOLIDATED STATEMENT OF FINANCIAL POSITION 29CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 30CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 31CONSOLIDATED STATEMENT OF CASH FLOWS 32NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 33

CONTENTSIntroduction 4Financial Highlights 5Directors 6Executive Management Team 7Chairman's Message 8Managing Director’s Report 10Management Discussion & Analysis 132017 Highlights 16Heineken Overview 18Kalik Overview 19Corporate Relations 20Employee Spotlights 21700 Wines & Spirits 22List of Stores 23

| COMMONWEALTH BREWERY | 2017 ANNUAL REPORT

I NTRO D U CTI O N

Although facing many challenges, Commonwealth Brewery has proven successful with each year. 2017 similarly, has witnessed good results. It is without a doubt that Commonwealth Brewery is able to face each year with resilience because of our commitment to being the leading Bahamian beverage provider. In years past, we have seen tremendous growth in revenue and workforce. With the undertaking of continuous training and development of staff, we have and will continue to groom top talent and provide outstanding service. Together, we’ve achieved many milestones in 2017 and triumphed over many challenges: excellent additions such as the Kalik Radler Cranberry and Pina Colada were indoctrinated into the Kalik family; our newly retail division, 700 Wines & Spirits celebrated its one year anniversary; and we were faced with the devastating Hurricane Irma, which although it did not impact Nassau, impacted our family islands. Despite external factors, Commonwealth Brewery still continues to demonstrate growth with guidance from our remarkable management team and staff. In the years to come, this company will continue to strive for improved processes and efficiencies while making sustainable contributions to our beautiful country and to our people. It is only through unity, passion and service that we will continue to move steadfast and produce great results for you, our shareholders.

In 2018 we are looking forward to celebrating the 30th anniversary of Kalik, The Beer of The Bahamas. This momentous celebration will highlight everything Bahamian -- those things that make our country the best in the world. Kalik invites us all to raise our glasses to The Bahamas, and to the beer that we choose to drink to complement our special moments. We are thankful to have a great country to call home, amazing staff who strive on excellence and quality, dedicated customers, innovative business partners and of course we are thankful for you, our amazing shareholders.

Because of you, Commonwealth Brewery is poised for a promising future.

Through the years, CBL’s journey has been filled with resilience and evolution. These characteristics were, and still are made possible because of our commitment to sustainable, profitable growth through our passion for people, quality and service.

COMMONWEALTH BREWERY | 2017 ANNUAL REPORT | PAGE 5

FINANCIAL HIGHLIGHTS

2017 2016 2015 2014 2013 2012 2011 2010

191 188 199 196 196 199 187 187

133,093 117,779 123,523 124,157 119,124 118,468 113,409 109,376

18,918 17,173 11,810 18,171 19,145 19,297 17,278 19,943

0.63 0.57 0.39 0.61 0.64 0.64 0.58 0.74

88,603 81,127 68,652 74,254 70,163 73,280 72,008 76,967

6,000 nil nil nil nil nil nil nil

18,600 17,100 18,300 18,300 19,200 17,400 25,153 26,268

6,821 3,821 2,173 2,758 1,721 2,445 1,314 1,404

455 426 413 402 385 381 390 384

BSD ‘000

Volume (‘000 hectoliters)

Revenue

Result from operating activities

Earning per share (cts)

Assets

Long term liabilities

Dividends

Capital expenditure

Employees (FTE)

COMMONWEALTH BREWERY LIMITED DIRECTORS

PATRICIA HERMANNSMs. Hermanns is the Director/CEO of The National Insurance Board and is a former banking and insurance executive with more than 30 years’ experience in the financial services sector. She is credited with managing corporate transitions for greater efficiency and effectiveness, and successfully launching new life and health insurance as well as investment products and services. Ms. Hermanns holds a Bachelors Degree in Economics and Spanish from New York University, New York, and a Masters Degree in Business Administration from the University of Miami. Ms. Hermanns currently serves as Director of Bahamas Electricity Corporation/Bahamas Power and Light, Director of Bahamas Resolve Ltd. and is also a trustee of the Anglican Diocese Pension Fund and of the Governor General Youth Award.

JULIAN W. FRANCIS

ED FIELDS

HANS NEVEN

DENNIS HANNA

PATRICIA HERMANNS

EUGENE UBALIJORO

GUIDO DE BOER

Julian W. FrancisCHAIRMANMr. Francis is a former governor of the Central Bank of The Bahamas and brings a wealth of knowledge and experience to the Board. He was previously the Chairman of The Bahamas Telecommunications Company Limited (BTC) and has held other chairmanships and posts in both governmental and private organisations. He holds Bachelor’s (with special honours) and Master’s degrees in Finance from New York University.

Ed Fields Mr. Fields is the Senior Vice President of Retail Services and Public Affairs for Atlantis and General Manager of Ocean Club Estates and Golf Course. He serves as Managing Director of the Downtown Nassau Partnership and as Commissioner of the Bahamas National Festival Committee. Mr. Fields holds a Bachelor’s degree in Government from St. John’s University in Minnesota and a Master’s degree in Public Administration from the University of Georgia.

Hans Neven MANAGING DIRECTORMr. Neven is the Managing Director of Commonwealth Brewery Ltd. With 19 years experience with Heineken NV, Mr. Neven has led an impressive turnaround in the organization’s newly acquired operations, creating winning and challenging teams which delivered strong and sustainable year on year topline and market share gains, resulting in impressive financial results. Mr. Neven holds a Master’s degree in Business Administration from The Free University of Brussels.

Dennis HannaCORPORATE RELATIONS DIRECTORMr. Hanna is the Corporate Relations Director for Commonwealth Brewery Ltd.He has more than 27 years experience with the Burns House Group of Companies in various capacities: Corporate Relations Director, Retail Director, Supply Chain Director(BHL), Logistics Manager, Brand Manager. He presently serves as a member of the Vestry for Epiphany Anglican Church. Mr. Hanna holds a Bachelor of Science Degree in Accounting from Elmira College.

GUIDO DE BOERGuido de Boer is CFO of HEINEKEN’s Americas region since 2016. Prior to this role, he was CFO for FRANCE, and CFO and Executive Director at United Breweries Ltd, India’s largest brewery. He joined Heineken in 2004 following a career in investment banking, as a Director in HEINEKEN’s Global Business Development department, leading acquisition projects across the globe. He has an MSc in Finance from Erasmus University Rotterdam, and has attended various executive management programs, including at Harvard, INSEAD and IMD.

Eugene Ubalijoro Mr. Ubalijoro is the Managing Director of Heineken Caribbean & American Export. He has had a varied career with Heineken since joining in 1990 as the first African international trainee. In 1995, Mr. Ubalijoro became Heineken USA’s first Regional Marketing Manager for the Southeast Region. He has been a consultant in Amsterdam, Commercial Manager in Sub Sahara Africa and Managing Director in La Reunion. Mr. Ubalijoro holds a Bachelor’s degree in Business Administration from Georgetown University and an MBA from Université de Sherbrooke.

Pictured left to right: Dennis Hanna – Corporate Relations Director, Mustapha Gammar – Finance Director, Ron Hepburn – Retail Director, Nadia Stubbs – HR DirectorHans Neven – Managing Director, Alberto Terzi – Supply Chain Director, Ricardo Richards de la Garza - Commercial Director


COMMONWEALTH BREWERY LIMITED EXECUTIVE MANAGEMENT TEAM

VISION STATEMENT"Commonwealth Brewery Limited is committed to being the leading Bahamian beverage company, achieving sustainable profitable growth through passion for people, quality and service"

CHAIRMAN's messageJULIAN W. FRANCIS

Dear Shareholders,I am pleased to report that the operating year 2017 was encouragingly positive for our business!

The hopeful economic signs which we saw emerging in 2016 developed further last year and promise, as I prepare this message, to continue through 2018.

THE ECONOMIC ENVIRONMENTThe global economy is estimated to have grown by 3% in 2017, up from 2.4% in 2016. The United States economy expanded significantly by 2.3% last year, up from 1.5% in 2016, and is forecasted to exceed 2017, at least modestly, during 2018.Here at home, the favourable U.S. economic performance, the traditional boost provided by the general elections held in May 2017, consolidation of the BahMar project start-up and rebuilding

following the 2016 hurricane disasters, were the principal factors providing economic lift, despite a generally weak performance by the tourism sector.

While The Bahamas itself, unlike in 2016, escaped major direct hurricane impact, except for the south of the chain of islands, our tourism industry was inevitably constrained by the handicap to Caribbean tourism as a whole as a result of the major hurricanes which devastated several of our southern neighbors in September.The International Monetary Fund estimates that The Bahamas economy grew by 1.3% in 2017, compared to a virtual flat performance in 2016. The broad expectation is that the above context, strengthened further by a general optimistic “feeling” about the short term outlook, will push the Bahamian economy above the 2% per annum growth mark in 2018. Good news for our business!

PAGE 8 | COMMONWEALTH BREWERY | 2017 ANNUAL REPORT

CBL’S PERFORMANCE IN 2017The above partly explains CBL’s 13% positive top line performance in 2017. This result, however, would not have been possible in the absence of continued aggressive product management and marketing. Several new products were added to the CBL-manufactured brands, and the continuous endeavor to satisfy the product delivery desires of the Bahamian marketplace offered some appealing solutions.

While a large part of the almost $7 million of new capital investment undertaken this last year related to restoration of the brewery, following Hurricane Matthew in 2016, CBL continues to invest aggressively in the upgrade and expansion of its distribution network. I am sure you are aware of, and hopefully enjoy, the continuous improvements evident in many of our outlets throughout our islands.

OUR PLACE IN THE ECONOMYI would like to point to the continuous growth in CBL’s staff compliment! Compared to 390 full time employees in 2011, when the company went public, the FTE number reached 455 in 2017, largely to support CBL’s distribution footprint, but reflecting also, development throughout the business. We are proud to be, by almost any measure, one of the largest private sector businesses underlying the Bahamian economy. You may be assured that your company continues to be fully committed to the highest standards of excellence in every facet of our activities.

WTO CHALLENGEThe Government of The Bahamas has announced that the country will work towards World Trade Organization (WTO) accession by 2019. There is wide concern, particularly on the part of certain sectors of the business community, including the manufacturing sector, that removal of protective import and other existing barriers will, in the short to medium term, inflict considerable adjustment pressures on those sectors. There is also a realization, shared by many, that the risks are considerably greater should The Bahamas not embrace the rigors imposed by WTO accession.

CBL seeks to participate as fully as possible in the process by which the private sector will cooperate with government to influence how, and in accordance with what timeframe, these important changes are implemented.

2018Despite the encouraging performance in 2017, the year 2018 will not be without its challenges. The fragile economic upturn being experienced occurs while the new government seeks to make fiscal adjustments, the benefits of which will not all be immediate. We are satisfied, however, that our business is in many respects better prepared than ever to navigate these uncertain conditions.

COMMUNITY OUTREACHYour company in 2017, maintained its leading posture as a Bahamian business which heavily supports a wide array of needs throughout the community. These range from emergency rescue and relief services, education, health services and infrastructure, industrial training, environment and more. Our efforts in this regard recognize the critical partnership which must exist between government and the private business sector in sustaining and developing our community.

THANK YOUAs always, I wish to thank the tireless CBL team for their excellent work. But most importantly, thank you to our loyal shareholders, customers and business partners for your continuing support. Without you, we could not exist.


JULIAN W. FRANCIS | CHAIRMAN


OUR PEOPLEAt the end of 2017, the results of our annual employee Climate Survey showed dramatic improvements. When compared with surveys from 2007 onwards, data positively indicated that the results of this exercise outperformed all previous surveys. Through numerous efforts and initiatives, such as coaching, training, onboarding, recognizing talent and improving communications, employees feel loyal to the company and are motivated to grow the business.

To deepen this loyalty, and to recognize high achievers, in March your company officially introduced the Commonwealth Brewery Star Awards. Each month, employees wait in anticipation to see who will be recognized in the areas of Employee of the Month, Supervisor of the Month and Manager of the Month. Those nominated are eligible for even greater recognitions quarterly and at the end of the year.Our business is not only about producing quality products, it’s about the people who make and sell the products.

Although celebrating each team member’s hard work and dedication, workforce safety is equally important. Employees are continually reminded that their safety is paramount, and that is why our company mantra before every endeavor continues to be “safety first.” To that end, in December, the company was pleased to celebrate 300 days without a single accident at the Clifton Pier brewery site.

As with any company that strives to be the best that it can, people are the most critical component to CBL’s success.

HURRICANE AFTERMATH Rebuilding the brewery after the extensive damage caused by Hurricane Matthew was a major enterprise initiative for the year. Both the supply chain and brewery staff are to be commended for the extra energy they have put in to ensure that facilities are back up to standard. Currently, the last repairs to the brewery roof, the final element to rebuilding the facility, are being concluded.

Notably, through the diligent work of our committed back office support departments, the insurance claim settlement for hurricane damages was settled in our favor for a total amount of $12.3 million. This is the biggest insurance claim settlement ever in the 150 year history of Heineken worldwide.

GROWTHOur topline growth was impressive in the first part of the year. This was due to the financial injection into The Bahamas after the hurricane, the insurance settlement and “election fever” taking place. During the second part of the year, however, topline growth was under pressure. Despite this, your company still ended the year strong as a result of sales from our internationally-recognized main brands such as Kalik, Heineken, Guinness and Vitamalt.

RETAIL2017 saw further roll out of the 700 Wines & Spirits branding which allows thousands of customers who shop daily for CBL products to identify them easier. There was positive growth in retail’s topline thanks

MANAGING DIRECTOR'S REPORT

Faced with an economy in recovery and the looming task of our own corporate recovery from the devastation of Hurricane Matthew in 2016, we knew that 2017 would be a year with significant challenges. In the true spirit that is at the heart of your company, Commonwealth Brewery adapted and navigated those challenges with ingenuity, innovative strategies and determination. Today, we are poised for a promising future. By every measure, CBL is a great company with a great history and with great potential. This dynamic potential has been illustrated through:

HANS NEVEN


to improved execution, expansion of stores and increased availability of desired non-core products.

A MOMENTOUS YEAREach month of 2017 saw CBL rolling out fresh initiatives designed to continue the momentum of growth. Achievements worth mentioning include:

• A newly signed distribution contract with British American Tobacco making your company the sole official distributor of these products throughout The Bahamas.

• The much anticipated February launch of the Eclipse 16oz. can in Grand Bahama.

• New products Kalik Radler Cranberry and Pina Colada were rolled out in April.

• May saw the kickoff of our 700 Advantage Loyalty Program, an initiative allowing consumers to earn points for a dollar value spent in 700 Wines & Spirit stores across the country and to redeem these points for future purchases. Remarkably, there are already thousands of customers that are currently being rewarded with hundreds added each week across the Bahama islands.

• Residents of Matthew Town, Inagua had reason to celebrate in June as a new retail location was opened there. As a direct result of that opening and the price control advantage that CBL offers in the market, consumer prices went down dramatically for that area.

• In August, a new Vitamalt Acai flavor was introduced and well received.• In November we merged the Sales and Marketing departments into one

seamless Commercial department. This transition has allowed for more fluid operations, more efficiency and an increase in competencies of local managers.

PREPARING FOR THE FUTURECBL continues to be a financially sound company that is always looking to the future.

Rethink is an example of this forward thinking. Our Rethink program was created by our managers with the goal of striving toward zero bad costs. Great efforts have been put into negotiating the best rates in a variety of areas ranging from bank charges and travel costs to telecommunications and importation costs and beyond. Already, these efforts have allowed us to save millions of dollars to prepare the company for the future.

During the last four years, it has been our charge to “Heinekenize” the company to make sure the values, systems and procedures are held to the

high Heineken standard – a standard known worldwide for tested processes that lead to customer loyalty, shareholder value and an innovative future.Your company is committed to staying competitive by being the best now, and far into the future.

A LASTING POTENTIAL AND A GREAT VISION

“Every day for the last four years, I have had the pleasure of leading a business that is ripe with potential. It has been my focus to make sure that your company is yielding world-class results.

Like the vision of prosperity that permeates the beautiful Bahamian islands that I have been able to call home for a time, the great vision of this uniquely Bahamian company continues to fly high.

Our shared ideal as stated in our official vision statement is that Commonwealth Brewery Limited is committed to being the leading Bahamian beverage company, achieving sustainable profitable growth through passion for people, quality and service.

As I have stated before and I state again with great sincerity and lasting pride, by every measure, CBL is a great company with a great history and with great potential. “

HANS NEVEN | MANAGING DIRECTOR

management discussion& analysis

management discussion& analysis

This management discussion and analysis (MD&A) should be read in conjunction with the audited consolidated financial statements for the year ended December 31st, 2017 and its related notes. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and are expressed in Bahamian dollars. This MD&A is dated, 16th April 2018.

The MD&A might from time to time contain forward-looking statements. Readers should be cautious in interpreting these statements. Forward-looking statements involve numerous assumptions. Changes in these assumptions could cause actual results to differ materially from the expectations in those statements.

Revenue - Quarter 1

Excise Taxes

Cost of Goods Sold

GROSS PROFIT

133,093,069 117,778,505 15,314,564 13%

(16,092,838) (15,779,189) 313,649 2%

(57,741,440) (46,290,661) 11,450,779 25%

59,258,791 55,708,655 3,550,136 6%

Gross profit increased by only 6% year over year due to increase in Excise taxes and other Cost of Goods sold. Excise is a factor of beer produced during the year and increases when there is a higher beer sales mix in Gross revenue. The erosion of the gross profit margin and ultimately the increase in Cost of goods sold of 25% or $11.5 million is due to the import charges for the tobacco brands, as well as logistic costs for finished products. CBL seeks to manage these costs by optimizing top line performance and growth while seeking to leverage economies of scales to reduce logistics costs.

Other income

As shown in Note 16 of the Consolidated Financial Statements CBL incurred losses due to inventory destruction, property damage and lost sales due to the impact of a hurricane that hit The Bahamas in October 2016. These losses were covered under the Group’s Comprehensive Insurance Plan and resulted in recoveries of stock and lost sales of $1,930,712 and $2,800,000 respectively for the period to December 31, 2016. The final settlement of the insurance occurred in August 2017 with the total settlement of $11.9 million of which $7.3 million is recognized in the 2017 Financial Statements. These amounts are recognized in Other income as it is considered an extraordinary event.

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONCash and cash equivalents declined by $7.2 million as the Company continues to reinvest in itself by restoring the Brewery, expanding its Retail footprint and investing in a project for construction of a new Corporate office. This can be seen by the substantial increase to additions to property, plants and equipment of $6.8 million as shown in the Consolidated Statement of Cash Flows. CBL is still committed to provide tangible results to its various Shareholders and continues to distribute 100% of its Net income during the subsequent year. This effort along with maintaining vendor relationship has contributed to the shift in cash flow. As we move into the final stages of the restoration efforts and place more resources into working capital management, the Company expects to see a shift in this trend during 2018.

The Company has an appraisal completed on each of its owned Land and Property periodically with the latest occurring in 2017. This resulted in a Revaluation Surplus of $5.4 million during the year that is accounted for in Property, plants and equipment and also Other Comprehensive income on the Consolidated Statement of Financial Position and Consolidated Statement of Profit or Loss and Other Comprehensive Income respectively. This represents an artificial gain on the value of the Company’s assets that will only be realized if and when a sale of these assets would occur. The Company has no immediate plans to dispose of these assets in the near future.

Financial Performance


2017 2016 %

Revenue - Quarter 1

Revenue - Quarter 2

Revenue - Quarter 3

Revenue - Quarter 4

TOTAL REVENUE

30,256,062 27,519,158 2,736,904 10%

36,258,479 31,172,676 5,085,803 16%

31,095,893 28,680,523 2,415,370 8%

35,482,635 30,406,148 5,076,487 17%

133,093,069 117,778,505 15,314,564 13%

REVENUE

GROSS PROFIT

Commonwealth Brewery Ltd. (CBL) experienced a volatile year as seen in the quarterly comparisons in Revenue due to the constant changes in the economy and consumers spending patterns. Despite the challenges, the Company delivered a 13% ($15.3 million) growth in revenue when compared to the previous period. This growth is in line with the Company’s strategy of investing in top line growth by diversification and optimization of its portfolio as well as focusing on innovation.

CBL is committed to sustained revenue growth and increasing its geographical footprint to provide this sustainability. The decrease in revenue received from the Northern Bahamas due to economic factors and disposable income have been offset by increasing CBL’s presence in the Central and Southern Bahamas. The expansion of the Beer portfolio, Spirits and tobacco brands garnered the opportunity to improve on 2016 performance and provide sustained growth.

RESULTS FROM OPERATIONS

2017 2016 %

There has been no change to the related party facility utilized by the Company during 2017, as the balance remains at $5.9 million. This facility has a maturity date of May 19th 2018 with an option to renew for another year bearing 2.62% per annum. The Company intends to renew the facility for an additional year.

LIQUIDITYUnder stable market conditions, the company does not experience major fluctuations in liquidity, due to working capital requirements or development activities. The company does not employ derivative financial instruments and is free of long term debt. The liquidity risk of the company is described in note 23(c) of the disclosures to the consolidated financial statements and relates mainly to accounts payable obligations, related party dividends and operating leases. The company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities and other commitments, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation.

Total < 1 year 1-2 years 2-5 years >5 years

Loans and borrowings 5,999,993 - 5,999,993 - -

Dividends 5,624,905 5,624,905 - - -

Operating leases 5,434,737 509,136 546,467 4,060,734 318,400

Purchase obligations - - - - -

Account payable and accrued expenses 15,084,326 15,084,326 - - -

Total contractual obligations 31,143,961 21,218,367 6,546,460 4,060,734 318,400

CONTRACTUAL OBLIGATIONS 2017 PAYMENT DUE BY PERIOD


CAPITAL RESOURCESAt December 31st, 2017, Commonwealth Brewery had no material commitment of capital resources in place. The company generates sufficient cash from operations for its own needs.

The dividend policy of Commonwealth Brewery is to distribute 100% of its net income. The frequency and payout ratio for any dividend remains at the discretion of the Board of Directors and is subject to the approval at the Annual General Meeting of shareholders.

OFF BALANCE SHEET ARRANGEMENTSAs of December 31st, 2016 the company had no off-balance sheet arrangements with any parties. Note 14 of the consolidated financial statements lists the commitments and contingent liabilities of the company. The majority of commitments relates to lease contracts for commercial real estate, most of which are short-term with duration of one to five years. The main contingent liabilities are related to customs bond guarantees and standby letters of credit.As at December 31, 2017 the Group was contingently liable to the Department of Inland Revenue on their assessment of intra-company stock transfers between its subsidiaries for Business Licence purposes. The Group was assessed $560,403 (2017) and $596,003 (2016) and a Bank Guarantee was issued pending the outcome of arbitration. The matter is still pending as of the date of issuance.

TRANSACTIONS WITH RELATED PARTIESCommonwealth Brewery has a number of transactions and agreements with other entities of the Heineken Group in place. These transactions and agreements relate to the secondment of senior employees, purchasing of raw and packaging materials, supply chain consultancy, transport of products, bottling, trademark licensing, IT services and management fee, dividends and borrowrings. The amounts related to these transactions are specified in note 15 of the consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES AND POLICIESNotes 2 and 3 of the consolidated financial statements detail the Significant accounting policies and estimates of Commonwealth Brewery Ltd. Management considers none of these accounting policies and estimates to be critical, meaning that the policies and estimates require the company to make assumptions about matters that are highly uncertain and that different estimates are reasonably likely to occur from period to period, which could have a material impact on financial results.

Note 8 details the assumption used to test impairment on goodwill annually. The company carries net $4,487,242 in goodwill, resulting from the acquisition of 100% ownership interest in Butler & Sands Company Limited in the year 2000. Goodwill by nature is subject to the risk of impairment if key assumptions like the projected sales volume of acquired wine and spirits brands change. However, using reasonable expectations only a limited change in key assumptions would occur, and this would not cause a material impact on results.

2017 HIGHLIGHTS


JANUARY Signing of contract to become the official distributor for British American Tobacco brands in the Bahamas.

FEBRUARYSuccessful launch of Eclipse 16oz. cans in Grand Bahama.

MAYThe 700 Advantage Loyalty Program was launched. With every purchase spent over $10 consumers earn %5 cash back on their favorite beers, wines and spirits.

JUNE700 footprint expansion of two new stores, Palmdale Shopping Plaza in Nassau, and Matthew Town, Inagua.

SEPTEMBERMinimal impact of hurricane Irma on New Providence and family islands to staff, warehouses, offices and stores.

OCTOBERClimate survey results of 2017 were the best achieved since the introduction of this survey in The Bahamas a decade ago.


MARCHOfficial launch of the Commonwealth Brewery Star Awards, the first company-wide recognition program highlighting outstanding performance.

APRIL Kalik Radler Cranberry and Kalik Radler Pina Colada was launched.

JULYNegotiated final insurance settlement amount of 12.3 million USD.

AUGUSTNew Vitamalt Acai flavor was launched.

NOVEMBERTransition into the new Commercial Organization.

DECEMBERThe brewery celebrated 300 days without an accident.

Heineken worked to make the brand accessibly premium in 2017 by bringing world class execution with a mass appeal. There were a multitude of initiatives but the most important were the Heineken Escape Series of experiences, Live Your Music which included a UTC, DJ Clash Series, and Concerts, and the Festive promotion.

2017 Started with the Heineken Escape Series. These parties took thousands of consumers from New Orleans Mardi Gras, to 1930’s New York, to a Brew Pub on an Amsterdam Canal. Each experience was unique and exemplified the worldliness of the Heineken Brand.

After its world tour Heineken reintroduced the art of DJ Clashing with the Heineken Live Your Music DJ Clash. This was a series of 6 Clashes in New Providence and Grand Bahama where thousands came out to see their favorite DJs compete for a weekly $1,000 prize and a Grand Prize of

$5,000. This was accompanied by a Heineken Under the Cap promotion which featured prizes like Headphones, Speakers, BTC Data, entry to 3 concerts, and of course complimentary Heineken.

The Heineken Live Your Music concert series allowed consumers to use their caps to enter concerts for free. For these concerts Heineken had 3 legends. The first was Sizzla, followed by Popcaan, and finally Aidonia.

Heineken ended the year by giving back to its consumers in the festive season. Not only was there a complimentary Heineken with every 3 pack, the brand also used the Heineken Bus to offer consumers their “First Round On Us”.Heineken had an eventful year and increased local relevance. In 2018 the brand will continue to work to be accessibly premium, while pushing to ensure it delivers unforgettable one of a kind experiences.

Heineken BRAND ACCESSIBLITY in 2017

KALIK

Kalik, The beer of The Bahamas continued its march to the beat of the Bahamian spirit and steady growth trend. The brand continued to win hearts and influencing people with the introduction of programs and initiatives aimed at celebrating the uniqueness and vibrancy of Bahamian culture. The Made in The Bahamas party series, allowed the brand to engage Bahamians in a way that only Kalik can do – a celebration of Bahamian music, food, culture and the beer we drink to celebrate that!

THE BATTLE OF THE RADLERSThe Kalik Radler, Bahamian family of flavorful refreshment introduced two new dynamic members to it’s lineup; Kalik Radler cranberry and Kalik Radler pina colada. The colorful and flavorful new additions to the KALIK Radler family infiltrated the market, with Kalik Radler cranberry quickly becoming a fan favorite. The KALIK Radler family, went head-to-head in an online poll www.battleoftheradlers.com to see which was the Bahamas’ favorite.

FAMILY ISLAND EXPANSIONKALIK, expanded its support and involvement with out-island

activities, doing our part to help support the evolution and expansion of our roots & heritage. KALIK’s commitment to the empowerment and evolution of family island will continue to grow and develop for the benefit of all family islanders.

THE BEER OF CARNIVAL Kalik Light Platinum encouraged millennials to Live for Platinum moments with the Bahamas’ official party beer. The second year of the official party beer of The Bahamas ushered in the creation of PLATINUM BUB and KALIK “Get Lit,” party series which provided an unmatched party experience for all attendees.

KALIKERSThe KALIKERS are back! After a one-year hiatus, the KALIKERS were back on Bay Street with a new hit song! KALIK, a brand connected to Junkanoo from birth, is a proud Platinum sponsor of the Junkanoo Corporation of New Providence and is proud to provide the opportunity for Bahamians from far and wide to have the opportunity to partake in the country’s most significant cultural occasion.

THE BEER OF THE BAHAMAS


BEACH CLEAN-UP AND LIGNUM VITAE TREE PLANTINGIn 2017, we held a beach cleanup initiative. With this role we not only assisted with the cleanliness and sustainability of the environment, but we brought the community together to develop a thoughtful awareness and concern for the environment that surrounds them.

BTVI MEDIA PROGRAMCBL’s involvement with BTVI creates awareness for vocational training and its importance. It helps shed a light on the fact that technical education is as significant to the country as academic pursuits. The media program will produce experts in the event production and media industry, who will contribute to corporate Bahamas, and we appreciate these skills. CBL believes in persistently supporting Bahamian talent, and we hope to harness the talent produced in these programs.

ENDOWMENT FUNDEvery year, CBL supports the endowment fund at the University. In 2017, we had our very first scholarship recipient and intern at CBL, Ms. Crystal Roberts. Ms. Roberts is now employed with the company and is in a role where she will be shadowing our different MT directors in the respective departments. Currently she is assisting the Corporate Relations Director and will move into her succeeding position at the end of 2018.

WORLD HEALTH & SAFETY DAY In September of 2017 we celebrated World Health and Safety Day, which included discussions on responsible consumption and health and safety as these are vital behaviors of our company’s culture. In partnership with The Royal Bahamas Police Force, the Bahamas Telecommunications Company and The Bahamas Aids Foundation, there was a national discussion on sound safety practices and health. We provided our team members, who are required to drive, with hands free devices that would allow them to be responsible and safe while on the road. We distributed Heineken life safety rules pamphlets and t-shirts to members as we enhanced the conversation on Safety.

NEMA & RED CROSS RELIEF AND RESTORATION EFFORTS. Commonwealth Brewery Ltd. made a contribution of $20,000 respectively to both the National Emergency Management Agency and The Bahamas Red Cross Foundation. This contribution was made in efforts to assist in the relief and restoration efforts of damages due to Hurricane Irma.

CBL AIMS TO BE THE BEST CORPORATE CITIZEN THROUGH ITS PASSIONATE INVOLVEMENT THROUGHOUT THE COMMUNITY. This commitment was strengthened by a number of initiatives in 2017. We not only assisted within communities, and with the sustainability of the environment, but we encouraged and allowed those communities to come together, bridging gaps, raising ecological, educational and vocational awareness. Our support to NGO’s have also been steadfast with contributions like those donated to NEMA and the Red Cross for hurricane relief efforts. We strive to do even more for our environment and community, which will in turn allow us to become the best corporate citizen that we can

corporate RELATIONS

EMPLOYEE SPOTLIGHTS


A Uniquely Bahamian Success Story. Employees Share Their Experiences.

“Working at CBL part-time while being a full-time university student is all about organization. After work, there are classes and group projects on the weekends. It’s a lot, but it’s manageable. I’ve learned project management, enhanced my writing skills and developed the ability to multitask because of CBL. Before applying for the scholarship, I did extensive research on the company. Learning about the company’s global perspective due to its connection with Heineken, and its commitment to the local community appealed to me. After three rigorous interviews, I was offered the scholarship. I couldn’t believe it! But I was ready to strap on my boots, open my mind to learn and take on the challenges. So many experiences stand out to me as a source of pride. During my first summer with the company I worked with another intern from London and together we gained a broad view of the company while helping to create an employer brand. As a large part of the country’s manufacturing industry, I’m proud that we do give back. We rely on the Bahamian people for our success so it makes sense that we invest in the community through Junkanoo, regattas and sports. All of these things combined makes us who we are, which is truly Bahamian. The younger generation of leaders wants a challenge; they want to know that their contributions are valued; and they want to know that they can make a change in a company. Commonwealth Brewery has all of those qualities. It gives you the creative space to bring your ideas to life.”

BARRINGTON ARCHER, TRADE MARKETING MANAGEREMPLOYED 5 YEARS

“Becoming the first Caribbean and Americas Export Trainee allowed me to learn all aspects of the business here in The Bahamas, in Nigeria and in Amsterdam. I’ve enjoyed being back in The Bahamas and leading the challenge of the newly established trade marketing department. I welcome challenges, and CBL is a very dynamic, fast-moving company. Everyday there’s something new, different and interesting that I get to experience. We employ 400 plus people in the country and we give Bahamians a sense of pride. We brew Kalik, the beer of The Bahamas, which is an internationally award winning beer of very high quality. With continued strategy, Ricardo Rums can easily become another international brand. Commonwealth Brewery is a source of national pride that creates professional opportunities for Bahamians.”

RICHARD BAILLOU, ASSISTANT WAREHOUSE MANAGEREMPLOYED 28 YEARS

“I started as a Helper on the trucks when I was about 19 and have worked my way up to becoming an Assistant Warehouse Manager. When I see Bahamians having fun at regattas or just relaxing on the weekend while enjoying our products, I know our team is partly responsible for them having a good time. Commonwealth Brewery is good for the economy. I’ve found that it’s a company that really invests in its employees. They put employees first. They have given me an opportunity to take courses, learn skills for the job and advance myself. If you’re looking to grow, Commonwealth Brewery will give you that chance. Most of what I’ve accomplished, including buying my home and providing a stable life for my family, has been because of CBL. We’ve been around for a while and with our good management and committed employees, we’ll be here for a long time to come.”

DAPHNE PATTON, STORE REPRESENTATIVE, CAVES VILLAGEEMPLOYED 29 YEARS

“I’ve always loved retail and have enjoyed working for Commonwealth Brewery over the years. The great thing about my job is that I get to interact with people from all over the world. It’s the best feeling when customers return and ask for me by name. That speaks to the attention that our team puts on customer service. Here in the stores, we have a standard that includes following store rules and regulations, and making sure our customers come first. We work hard, but we have fun. Through teamwork, we’ve become a family. One of the things I enjoy is that I’ve been able to work with a lot of young people. I always emphasize to them that this is a good place to work. If they choose to stay with the company, they have opportunities to advance in the stores or to move on to other divisions. There is no limit.”

SUPPORTING THE BAHAMAS THROUGH EDUCATION: COMMONWEALTH BREWERY LIMITED EDUCATION FUND SCHOLARSHIP RECIPIENT EXCELS, LOOKS TO THE FUTUREAs a part of CBL’s commitment to investing in The Bahamas, it established the half-million dollar Commonwealth Brewery’s Endowed Educational Fund and Scholarship Award Programme in 2015 at the University of The Bahamas. Applicants must demonstrate leadership potential and stellar academics. Along with a year-round internship, the scholarship provides a study abroad experience, and a guaranteed two-year entrance level employment opportunity. Scholarship recipient and Commonwealth Brewery Intern Crystal Roberts embodies the reason why the company is passionate about developing future leaders.Now a third year Business Management student at the university, Crystal reflects what she’s learned from her experience in her own words:

CRYSTAL ROBERTS INTERN, CORPORATE RELATIONS

700 wines & spirits STORES

ABACOConvenienceMarsh Harbour Convenience PlusTreasure CayPremiumMarsh Harbour

ANDROSConvenienceFresh CreekLowe Sound Mangrove CaySouth Andros

BERRY ISLANDSConvenienceBerry Islands

BIMINIPremiumBimini

CAT ISLANDConvenienceCat Island

ELEUTHERAConvenienceBluffHarbour IslandRock Sound PremiumGovernor’s HarbourHarbour IslandJean’s Bay

EXUMAConvenienceGeorgetown, Exuma

PremiumGeorgetown, ExumaGRAND BAHAMAConvenienceArcade Churchill Square Eight Mile RockPlaza Liquor THM Queens Highway PremiumRND PlazaSeahorse PlazaWest EndDuty FreeBHL Intl Airport Port LucayaPort Lucaya

INAGUAConvenienceMatthew Town

LONG ISLANDConvenience Long Island

NASSAU/PARADISE ISLANDConvenienceBernard RoadCable Beach Carmichael RDCarmichael Rd. (Next to Wendy’s)East Bay StreetEast Street SouthFox Hill Rd (Next to Island Luck)Fox Hill RoadPalmdale Shopping CentreRobinson Rd.

West Bay St (Trinity Place)Convenience PlusMarathon MallWest Bay StreetDuty FreeBay St. Opposite Sheraton HiltonBay StreetBay StreetLPI AirportLPI AirportLPI AirportWoodes RogersExpressEast St & Strachan’s CornerPremiumCable Beach Caves Village, West Bay StreetCoral Harbour Shopping CenterHarbour Bay Plaza, E. Bay Street J.F. Kennedy DriveShirley Street

SAN SALVADORConvenienceSan Salvador


2017 marked an exciting year for 700 Wines & Spirits, as we focused our efforts on enhancing the customer’s experience while delivering quality service.

We have often boasted “No other retailer of beers, wines and spirits covers The Bahamas quite like 700 Wines & Spirits”. In 2017 we expanded our footprint with 5 new locations to better serve our growing customer base. Undoubtedly, the highlight of these new additions was the establishment of a presence in the southernmost island of Inagua. Now residents and visitors of Matthew Town, can enjoy premium products and exceptional customer service without leaving the island. Additionally, we invested in major capital development to improve the customer’s experience at stores located in Grand Bahama, Andros, Exuma and New Providence.

Ron Hepburn, Retail Director, noted “…to truly excel as the leading beverage retailer we must exceed the customer’s expectation while anticipating future needs”. Accordingly, 700 Wines & Spirits expanded its portfolio to include an assortment of non-beverage products and placement of ATMs in select locations. We also increased our offering of premium tobacco products and became the only official Habanos Point in The Bahamas and Caribbean.

On May 18th 2017, we celebrated our 1st anniversary under the name, 700 Wines & Spirits. 700 Wines & Spirits values our customers and wanted to tangibly demonstrate our appreciation through the launch of the 700 Advantage Loyalty Program. This program rewards loyal customers with 5% cash back on purchases over $10 and boasted over 12,000 members at the close of 2017.

As we look forward to 2018, we are excited about the introduction of online shopping inclusive of a delivery service via http://www.700winesandspirits.com/shop.html. We are confident the launch of this e-commerce platform and other initiatives in 2018 will deliver continued positive results.

700 WINES & SPIRITS

700 wines & spirits STORES

AUDITORSDeloitte2nd Terrace West CentrevilleP.O. Box N-1720Nassau, The Bahamas

BANKERSScotiabank, Corporate and Commercial Banking CentreRawson Square, Nassau, The Bahamas

Citibank110 Thompson Boulevard, P.O. Box N-8158First Caribbean International Bank (Bahamas)LimitedShirley Street, P.O. Box N-7125

LEGAL COUNSELHiggs & JohnsonOcean Centre, Montagu ForeshoreEast Bay Street, P.O. Box N-3247

Registrar & Transfer AgentsBahamas Central Securities Deposi-tory2nd Floor, Fort Nassau Centre, British Colonial HiltonSuite # 202, P.O. Box N-9307Bay Street, Nassau, The Bahamas

Registered Office

Commonwealth Brewery Limitedc/o Higgs & Johnson Corporate Services Ltd.Ocean Centre, Montagu ForeshoreEast Bay Street, P.O. Box N-3247

Corporate OfficeClifton Pier, P.O. Box N-4936

A DV I S O RS



CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31ST, 2017

INDEPENDENT AUDITORS’ REPORT 25CONSOLIDATED STATEMENT OF FINANCIAL POSITION 29CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 30CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 31CONSOLIDATED STATEMENT OF CASH FLOWS 32NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 33

COMMONWEALTH BREWERY LIMITED

700 ISLANDS

Commonwealth Brewery Limited

Clifton PierP.O. Box N-4935

Nassau, Bahamas1 (242) 397-1400

www.CBLbahamas.com

CONTACT

ONE BEER

2017 annual report · consolidated statement of changes in equity 31 consolidated statement of cash...

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