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Half-year Report

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LONDON & DUBLIN, October 28, 2021--(BUSINESS WIRE)--

RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2021

C&C Group plc (‘C&C’ or the 'Group’), a leading, vertically integrated premium drinks company which manufactures, markets and distributes branded beer, cider, wine, spirits and soft drinks across the UK and Ireland announces unaudited results for the six months ended 31 August 2021 ("H1 FY2022").

H1 FY2022 FINANCIAL OVERVIEW

€m except per share items

H1 FY2022

H1 FY2021

H1 FY2020

Net revenue(i)

657.3

398.4

895.9

Adjusted EBITDA(i)(ii)

30.8

3.8

81.8

Operating profit/(loss)(i)(iii)

16.0

(13.2)

66.0

Operating Margin

2.4%

NM

7.4%

Exceptional credit/(costs) (post tax)

3.3

(6.8)

(2.0)

Basic EPS (cent)(iv)

2.5

(9.6)

14.2

Adjusted diluted EPS (cent)(iv)

1.6

(7.6)

14.8

Free cash flow(iii)(v)

26.2

(28.4)

90.9

Net Debt(vi)

245.8

371.6

343.6

  • Net revenue increased 65.0%(i) to €657.3m, reflecting the progressive reopening of the hospitality sector during the latter months of the first half.

  • In line with the easing of on-trade restrictions, the Group returned to profitability from June onwards.

  • Demonstrating the strength and resilience of the business, C&C recorded an operating profit(iii) of €16.0m for the first half despite some restrictions still in place.

  • Strong working capital discipline and C&C’s inherent cash generation capability resulted in a free cash inflow(v) of €26.2m pre-exceptional and a related free cash flow conversion of 85.1%.

  • Operating profit includes furlough income and temporary salary reductions of €5.2m. The Group discontinued the use of furlough in June when the business returned to profit.

  • Exceptional profit of €3.3m which primarily relates to the profit from the sale of Vermont Hard Cider Company ("VHCC"), COVID-19 provision release, profit on sale of depot offset by Rights Issue costs and increased finance costs due to covenant waivers.

  • Strong balance sheet position with net debt and liquidity of €245.8m(vi) and €474.9m(vii) respectively at end of August.

STRATEGIC & OPERATING HIGHLIGHTS

  • Successful execution of the Rights Issue which placed C&C in a position of strength as on-trade restrictions eased.

  • Efficiency and cost saving programme on track. Annualised savings of €9.0m generated in first half compared to pre COVID-19 cost base; target to deliver total of €18m annualised savings in FY2022.

  • C&C’s exposure to increasing input costs has been well managed in H1 FY2022, with modest exposure in H2 FY2022. With cost and capacity pressures evident, we have communicated a price increase across our GB customer base in October 2021.

  • C&C has effectively managed the various issues affecting the wider industry including shortage of drivers and CO2. C&C’s significant in-house network and CO2 recovery systems means the business has been able to broadly meet the needs of customers over the peak summer trading period, ensuring continuity of supply and service.

  • Appointment of Andrea Pozzi to lead a streamlining of the GB businesses; and announced that industry veteran Ralph Findlay will succeed Stewart Gilliland as Chairman in July 2022.

BRAND STRENGTH

  • The Group invested behind multi-platform and multi-channel advertising campaigns across its core brands over the key summer trading period – with the three brands featuring on TV.

  • Our strong performance in the off-trade has continued with Bulmers and Tennent’s growing MAT volume share in the data to H1 FY2022(ix)(x).

SYSTEM STRENGTH

  • Against a backdrop of industry wide capacity constraints, we have undertaken an optimisation programme in our GB network, this will drive better customer service whilst helping to deliver our ESG commitments through lower miles travelled.

  • C&C announced the simplification of our GB businesses under one leadership team and commencement of a significant change programme to improve efficiency and customer experience.

  • Continued momentum in our e-commerce business with online ordering in significant growth compared with pre-pandemic levels.

ESG COMMITMENTS

  • Eliminated all single-use plastic from our product ranges at Wellpark manufacturing site.

  • Alignment of the Group’s Executive Director Long Term Incentive Plan (LTIP) to our environmental targets in June 21.

  • From 1 April 2021 all of the electricity needs at C&C main sites are from renewable sources.

CURRENT TRADING & OUTLOOK

  • In September 2021, C&C served 89% of outlets versus the same period in 2019 and we are pleased to report that rate of sale per outlet has improved with volumes at 93% of the same period in 2019.

  • Assuming current trading conditions prevail, we expect to deliver FY2022 Operating Profit in the range of €50-€55m.

  • The Group’s near-term focus remains on serving customers and meeting demand whilst navigating the industry wide capacity constraints.

  • C&C will continue to execute its change programme as we move to our "One C&C" GB model.

David Forde, C&C Group Chief Executive Officer:

"Following the easing of on-trade restrictions over H1 FY2022, we are delighted to be back serving our customers and consumers in both indoor and outdoor hospitality across our core markets of UK and Ireland. We are encouraged by how quickly the on-trade recovered and we are pleased to report that trading in the first half has been ahead of plan and our inherent cash generating strengths are reflected in the return of the business to cash generation from June 2021.

With our well invested manufacturing facilities, close to the markets we serve, we have been able to react to demand and allocate resource accordingly, to maintain our output, notably being self-sufficient in CO2, navigating the supply issues faced by the industry. Further, we have been partly insulated from the on-going UK capacity constraints due to driver shortages through our network being owned and operated in-house, in addition to the advantages afforded by our leading scale and reach. This has allowed us to broadly meet demand over the peak summer trading period, ensuring we put our brands and our partner’s brands in the hands of the consumers who enjoy them. With this backdrop, I would like to personally thank all of our people who played a part in delivering this performance, their commitment, skill and experience is an invaluable asset to our business.

We have continued to progress our strategy, notably building our brand strength through investment in a multi-channel advertising campaign for our Magners, Bulmers and Tennent’s brands. This has in part been reflected by a robust performance in the off-trade and encouraging brand health scores. Our system strength has been enhanced by completion of the GB network optimisation, which will in time both improve service whilst drive efficiencies and reduce emissions. In addition, we have begun work on creating a One C&C GB business, aligning our three trading businesses, Tennent’s, Matthew Clark and Bibendum under one leadership team. This initiative will simplify our business while improving our overall customer experience. Lastly, we continue to progress our ESG initiatives with a full transition out of single use plastics in our product ranges at our Wellpark brewery and since April 2021, 100% of the electricity for our main sites is from renewable sources.

We entered the second half in a good position and we are focused on continuing to build a better business by developing brand and system strength, while navigating the near-term capacity constraints the industry faces."

ENDS

OPERATING REVIEW

Great Britain

€m constant currency(i)

H1 FY2022

H1 FY2021

Change %

Net revenue

146.3

108.1

35.3%

- Price/Mix impact

33.0%

- Volume impact

2.3%

Operating profit(iii)

10.8

6.5

66.2%

Operating margin

7.4%

6.0%

1.4%

Volume (kHls)

1,181

1,154

2.3%

- of which Tennent’s

439

407

7.9%

- of which Magners

278

300

(7.3%)

Market insight
With the reopening of the on-trade from April 2021 we have seen a shift in consumption dynamics from the off-trade to on-trade, predominately through Q2 FY2022. As a result off-trade value share of Scotland lager has reduced from 76% to 59%(ix), GB cider has reduced from 78% to 55%(ix), between March and August 2021 as on-trade volumes have grown. On the reopening of the on-trade, consumer demand has been particularly strong in the draught products and cocktails (spirits and liqueurs)(viii), driven by consumers seeking an experience that they could not enjoy at home.

As such, we have seen in the market data to 14 August 2021 that lager volume in the Scottish on-trade increased +94% in the last six months(viii). Conversely, off-trade Scottish lager volumes grew +2.5% for the MAT and decreased 15.5% on the latest six months(ix). The GB cider market has reflected the same trend, in the six months to 14 August 2021, volumes in the on-trade increased by 135.3% with off-trade volumes decreasing by -18.0% on the same basis(ix).

Operational performance
We are pleased to report that our Tennent’s IFT business traded in the month of August 2021 with 88% of the outlets that it traded with in August 2019, correspondingly revenues were at 95% of August 2019.

Despite the well-publicised supply chain issues in the UK, driven by driver shortages, combined with the on-going impact of COVID-19, our Wellpark manufacturing site remained fully operational throughout H1 FY2022. Our well invested site and our skilled and experienced team who have worked closely with our suppliers, have ensured we navigated the challenges of inbound supply chain constraints and CO2 shortages. Further, we have completed a full transition to out of single use plastics in our product range at Wellpark, ensuring stock availability in the new card packs.

With our logistics network owned and managed in-house, we have been able to take quick and decisive action to minimise the impact to customers due to the UK wide capacity constraints. We are pleased to report that our Scottish network achieved an On Time In Full ("OTIF") of 93.0% in August 2021 compared with 94.7% in August 2019, a figure we view as market leading.

E-Commerce
E-commerce continues to be a focus for the business and pleasingly 56% of August 2021 IFT revenue in Scotland was captured via our Tennent’s online platform or via EDI ("Electronic Data Interchange), compared with 38% in August 2019. Before trade reopened in April 2021, we setup all active trading accounts with e-commerce accounts to encourage online ordering with support for customers via online tutorials. In addition, our direct to consumer website has delivered a strong performance with over 36,000 visitors to the site in H1 FY2022 generating c.£0.3m of revenue whilst providing a platform for consumers to engage with our brands and purchase exclusive campaign merchandise.

Tennent’s
With the reopening of the on-trade we have seen Tennent’s latest six months volume share increase by +1.1% to 48.3%(viii). This has been driven by the speed at which outlets have come back trading and throughput has recovered as restrictions were removed. Tennent’s off-trade volume share of lager in Scotland has been broadly maintained on an MAT basis with an increase of 0.1% to 26.3%(ix).

The brand executed its biggest marketing campaign since T in the Park in 2016 which tied in with the Scottish national team’s involvement in the European Football Championship and saw the brand featured on TV. The latest You Gov survey we performed for the brand has seen the Brand Index score stabilise in H1 FY2022 following a dip in Q4 FY2021 which corresponds with the latest campaign(xiii).

Our recent investment into strengthening and innovating our Tennent’s brand with Light and Zero extensions, continues to perform strongly. Tennent’s Light now has approximately 1,400 distribution points across GB with the brand gaining over 400 listings in England and Wales through national retail. The focus in H2 FY2022 is on building rate of sale supported by trade marketing plans.

Magners and GB cider portfolio
Total Magners cider volume in H1 FY2022 is -7.3% compared with H1 FY2021, with net revenues at -6.4% on the same basis. The latest Magners GB off-trade MAT volume share is 9.1% a decrease of 0.5%(ix). In the on-trade in the latest 6 months volume share is stable at 4.7%(viii).

In April 2021, Magners launched a marketing campaign, ‘When Time Bears Fruit’ this included a six month on-pack summer promotion running in the off-trade on over one million Magners Original packs in key retailers. In addition, this was supported by digital media to drive awareness and rate of sale ("ROS"). The latest You Gov brand index scores for the brand represent a year on year improvement from 13.1 to 14.3(xiii).

Premium Beer
Premium beer, driven primarily by Heverlee, Menabrea, Drygate and Innis & Gunn, has grown its penetration of our Scotland IFT outlet base in August 2021 to 31% compared with 28% in August 2019. The rate of sale has improved in August 2021 compared with August 2019, reflecting the move to premiumisation by consumers and that the brands have been targeted into the right outlet demographic. However, with the on-trade closed at the start of H1 FY2022, GB volumes have been materially impacted and are -21% vs H1 FY2021. The latest You Gov survey for our premium Belgian beer brand, Heverlee, has reported an improved brand index score for the last two months and a year on year improvement from 5.5 to 6.4(xiii).

Wholesale distribution
With H1 FY2022 volumes materially impacted by restrictions in Q1 FY2022, in addition to supplier product shortages impacting availability. Total volumes are –46% in H1 FY2022 compared with H1 FY2020, improving over the period with Q2 volumes at -24% of Q2 FY2020. Net revenues have performed better than volume in H1, -38% compared with H1 FY2020, improving to -20% for Q2, this has been driven by improved category mix.

Financial performance
Net revenue for the GB division increased by 35.3% to €146.3m in the period, with margins improving on the re-opening of the more profitable on-trade. As a result, operating profit(iii) has increased from €6.5m(i) to €10.8m.

Ireland

€m constant currency(i)

H1 FY2022

H1 FY2021

Change %

Net revenue

115.1

91.4

25.9%

- Price/Mix impact

16.9%

- Volume impact

9.0%

Operating profit(iii)

8.3

0.8

937.5%

Operating margin

7.2%

0.9%

6.3%

Volume (kHls)

741

680

9.0%

- of which Bulmers

184

176

4.5%

Market insight
On the 26 July 2021, Ireland reopened indoor hospitality across the country following outdoor hospitality opening at the start of June 2021 although some restrictions still remain in place. This was the first time since March 2020 that many outlets had been able to reopen, especially those that are wet led. Restriction were further eased on the 22 October 2021 when late night establishments were allowed to reopen, however some restrictions remain. It is only in the last five weeks of H1 FY2022 that the hospitality industry has been able to operate at anything close to a pre COVID-19 basis, however based on market intelligence we would estimate that around 15% of outlets have yet to reopen.

As a result we have seen consumption dynamics change over H1 FY2022 with on-trade volume year on year growth accelerating over Q2 FY2022. The off-trade share of total LAD has slowed as a result of the reopening of the on-trade with growth of +9.7% on an MAT basis(x) decreasing to -9.6% in the latest three month data(x).

The Irish Government have now confirmed that Minimum Unit Pricing ("MUP") will be implemented from January 2022 although a date for Northern Ireland has yet to announced. Similar to the legislation introduced in 2018 to Scotland, it will set a minimum price per unit of alcohol sold by retailers with the aim to reduce problem drinking and associated pressures on public health and services.

Operational Performance
We are pleased to report that in the month of August 2021 we were trading with 91% of August 2019 outlets in the Republic of Ireland and 93% on the same basis in Northern Ireland. As a consequence, Q2 FY2022 on-trade net revenue was at 93% of Q2 FY2020 levels, reflecting the speed of recovery in the on-trade.

With our Clonmel manufacturing site, close to the market we serve, we managed to ensure high levels of stock availability as the on-trade reopened to meet customer and consumer demand whilst continuing to meet heightened demand for Bulmers and Magners in the off-trade. Our owned and in-house managed logistics network has delivered leading customer service with August 2021 customer OTIF of 94.6%. In addition, the Irish manufacturing site and network has been more insulated from the widely publicised supply chain constraints being experienced in the UK.

Our e-commerce platform, Bulmers Direct was launched in H2 FY2021 and in August 2021 the Irish business took 32% of its net revenue through online ordering, this will be a focus in H2 as the business looks to build on this momentum.

With MUP being implemented in January 2022, we have been working closely with our customer base through H1 FY2022 and will continue to do so through H2 FY2022 before its implementation. We continue to believe that Bulmers, our core off-trade brand, is well positioned ahead of MUP coming into effect.

Cider
Total cider volumes in H1 FY2022 were +2.7% on H1 FY2021 and -8.0% on H1 FY2020, with corresponding net revenues of +27.7% vs H1 FY2021 and -28.4% vs H1 FY2020. Bulmers has continued to perform strongly with 50.3% MAT volume share in off-trade cider(x), reflecting a 0.5% growth on a year ago(x) and 2.4% growth on two years ago(x) with value outperforming this. In the latest brand heath survey, the brand continues to be ranked the No.1 cider brand in Ireland across all measures, consistently outperforming its nearest competitor(xiv). In the on-trade, Bulmers volumes in August 2021 returned to 74% of August 2019 levels with corresponding net revenues at 77%, demonstrating how robustly trade has returned.

Beer
From July 2020, C&C took on the exclusive distribution of Budweiser in Ireland, however, due to on-going lockdowns we have not been able to trade the brand properly until H1 FY2022. We have added over 450 Budweiser distribution points which in turn have provided nearly 200 new pouring points for Bulmers Draught. In addition, Corona, which we are exclusive distributor for in Ireland, has grown MAT off-trade volume share of lager, growing by 0.1%(x) and 0.8%(x) compared with a year ago and two years ago.

Wholesale distribution and wine
With the on-trade closed for the majority of H1 FY2022, our wholesale channel has been impacted, however with our off-trade supply this has been offset to a degree with H1 FY2022 volumes at 82% of H1 FY2020 and net revenues at 91%.

Our off-trade wine business volumes for H1 FY2022 are +11.2% compared with H1 FY2020 although down 10.2% compared with H1 FY2021 with performance impacted by particularly strong summer trading in FY2021, in addition to some supply issues which have affected our ability to meet customer demand.

Financial performance
Net revenue performance in H1 FY2022 is +25.9% against H1 FY2021(i). With the reopening of the on-trade volume and revenues have begun to rebuild which has resulted in an operating profit of €8.3m(iii) in H1 FY2022 against €0.8m in H1 FY2021(i).

Matthew Clark and Bibendum

€m constant currency(i)

H1 FY2022

H1 FY2021

Change %

Net revenue

385.2

186.3

106.8%

- Price/Mix impact

39.7%

- Volume impact

67.1%

Operating loss(iii)

(4.3)

(20.5)

79.0%

Operating margin

NM

NM

Volume (cases k 9L)

9,760

5,842

67.1%

Market Insight
The GB on-trade has seen c.10,600 net site closures during the two years to July 2021, equating to a 9.1% contraction in the market(xii). The value outlet segment has seen the steepest declines -13.3% and accounting for nearly half of all net closures, this is driven by sports/social clubs, restaurants and hotels(xii). We continue to see city centres return more slowly, with urban areas accounting for 77% of all net closures(xii).

In the 12 weeks to 14 August 2021, drink sales in the GB on-trade recovered to c.86% of 2019 value with spirits outperforming(viii), driven by liqueurs and speciality spirits. PROOF, our inhouse insight team, established through their consumer research that four in ten visitors to the on-trade have consumed cocktails(xi). Beer remains stable, however draught continues to outperform packaged(viii) with consumers seeking a draught offering following reopening of the on-trade(xi).

Trading Performance
On-trade restrictions have gradually eased from April 2021 in England and Wales with these effectively removed in July 2021. As a consequence, volumes have rebuilt against the comparative month in FY2020 from c.37% in April 2021 to c.81% in August 2021. This was initially driven by strong distribution point recovery, however throughput then improved as indoor hospitality was allowed to reopen. During August 2021, volume throughput per outlet recovered to broadly FY2020 levels, with a robust operational performance and stock availability enabling Matthew Clark to broadly meet demand despite a backdrop of capacity constraints in the industry driven by a shortage of drivers.

Recovery was aided by the European Football Championship and further helped by England’s run to the final which supported mid-week trading. Further, warm weather and ‘staycations’ led to strong performances across traditional domestic holiday destinations, particularly coastal areas. The casual dining category has rebounded strongly with volumes in June 2021 at c.90% of FY2020, despite social distancing rules still being in place, and by the end of August 2021 they were broadly in line with FY2020. Conversely, hotel recovery, particularly in urban centres, has been slower with volume recovery at c.57% of FY2020 in June 2021 but we have been encouraged over the summer as trade has rebuilt to 74% of August 2020.

Net revenue per case has performed strongly with higher value categories such as spirits performing well, supported by premiumisation and consumer readiness to pay more as part of a drinking occasion. Matthew Clark was profitable in Q2 FY2022.

E-commerce
We continue to see growth in the use of our Matthew Clark Live, e-commerce platform, with 59% of our total IFT revenue in the month of August 2021 captured via Matthew Clark Live and EDI orders compared with 34% in H1 FY2020. To further advance the use of this more efficient order capture method all promotional activity was moved to online only. In addition, our Bibendum e-commerce platform is intended to go live in H2 FY2022.

Operations
As result of the widely publicised capacity constraints, driven by driver shortages, our customer service levels have been impacted. On Time In Full ("OTIF"), one of our key delivery metrics, was c.75% for August 2021 in comparison to 96% in August 2019, the impact driven by suppliers ability to deliver and restock our network with inbound supplier OTIF at c.39% for August 2021. We have been able to continue to deliver much higher levels of customer OTIF by: utilising the scale and reach afforded by our network and the flexibility of managing our own logistics operation. During H1 FY2022 we have undertaken a number of initiatives to create capacity in the network, including: delivery day changes; increasing minimum order value to improve efficiency and simplification of our offering.

Continuity of supply has been the key focus in H1 FY2022 and will continue to be in H2 FY2022. Where availability of supplier stock is limited due to production or logistical challenges, we are fully engaged with our supplier base to work on solutions to ensure we optimise our allocation of stock. To maximise our stock capacity and improve efficiency within our depot network we are undertaking range reviews to ensure we can best serve our customers.

Financial Performance
Net revenue of €385.2m in H1 FY2022 is +106.8% on H1 FY2021(i), principally driven by volume, following the easing of COVID-19 trading restrictions, resulting in an operating loss of €4.3m(iii).

International

€m constant currency(i)

H1 FY2022

H1 FY2021

Change %

Net revenue

10.7

12.6

(15.1%)

- Price/Mix impact

(13.9%)

- Volume impact

(1.2%)

Operating profit(iii)

1.2

-

100.0%

Operating margin

11.2%

-

11.2%

Volume (kHls)

82

83

(1.2%)

Operational performance
The markets that performed relatively well in FY2021, notably the Nordics, Russia, the Middle East and across Asia Pacific ("APAC") have continued to do so through H1 FY2022. These markets have benefitted from a stronger off-trade position, an established domestic customer base and from lower levels of hospitality restrictions. We have been pleased with the performance and resilience of our Magners brand in Australia and New Zealand markets.

In our tourist markets, a return to international travel resulted in a volume boost across Spain, Portugal and the Mediterranean during Q2 FY2022 although with tourist numbers still impaired we have not yet seen demand return to pre COVID-19 levels. Overall Q2 FY2022 volumes were at 56% of Q2 FY2020 levels in the tourist markets of Spain, Portugal, Malta, Greece, Gibraltar and Cyprus. We remain encouraged by how quickly the tourist markets have returned as restrictions have eased and the clear underlying demand for our brands in these markets. We are well positioned to capitalise on the demand for our brands as travel restrictions ease and the potential boost for ‘winter sun’ destinations through H2 FY2022.

As previously communicated, C&C disposed of VHCC operations and associated brands, notably Woodchuck and Wyders, in April 2021. VHCC continues to be our distributor in this market notably for our Magners and Blackthorn brands. Total North American volumes in H1 FY2022 were -27.4% compared with H1 FY2021.

Financial performance
Net revenues of €10.7m in H1 FY2022 are -15.1% against H1 FY2021(i), this has in part been impacted by the sale of VHCC. Our international business has returned to profit in H1 FY2022, delivering €1.2m operating profit(iii).

Notes

Footnotes included at the bottom of each operating section

  1. H1 FY2021 and H1 FY2020 comparative adjusted for constant currency (H1 FY2021 and H1 FY2020 translated at H1 FY2022 F/X rates) see H1 FY2021 calculation on page 15.

  2. Adjusted EBITDA is earnings before exceptional items, finance income, finance expense, share of equity accounted investments profit/loss after tax, tax, depreciation and amortisation charges. A reconciliation of the Groups operating profit/(loss) to adjusted EBITDA is set out on page 13.

  3. Excluding exceptional items.

  4. Adjusted basic/diluted earnings/(loss) per share (‘EPS’) excludes exceptional items. As outlined in detail in note 5 of the Condensed Consolidated Interim Financial Statements, in both Basic and Adjusted EPS, the current period and comparative periods EPS calculations include an adjustment to the number of shares outstanding before the Rights Issue to reflect the bonus element inherent in it and to ensure both the current period calculation and the prior periods calculation are on a comparable basis.

  5. Free Cash Flow (‘FCF’) that comprises cash flow from operating activities net of tangible and intangible cash outflows/inflows which form part of investing activities. FCF highlights the underlying cash generating performance of the ongoing business. FCF benefits from the Group’s purchase receivables programme which contributed €115.6m (28 February 2021: €45.0m; 31 August 2020: €89.4m) to cash in the period. A reconciliation of FCF to net movement in cash per the Group’s Cash Flow Statement is set out on page 13.

  6. Net debt, including the impact of IFRS 16 Leases, comprises borrowings (net of issue costs), lease liabilities capitalised less cash. Refer to note 9 of the Condensed Consolidated Interim Financial Statements.

  7. Liquidity is defined as cash plus undrawn amounts under the Group’s revolving credit facility.

  8. GB on-trade: CGA OPMS Data to P08 2021 (14 August 2021).

  9. GB Off-trade: IRI data to 05 September 2021.

  10. Nielsen IQ, Off-trade including Dunnes and Discounters (ex. Independents), Volume Share of Cider, August 2021.

  11. POURTRAITS consumer research October 2021 and March 2021.

  12. OUTLET.GB (PROOF’s on-trade market model).

  13. YouGov Brand Index. 1 September 2020 – 31 August 2021.

  14. YouGov Brand Index, ROI total population, Period to 26 August 2021.

Conference call details | Analysts & Institutional Investors

C&C Group plc will host a live conference call and webcast, for analysts and institutional investors, today, 28 October 2022, at 08:30 BST (03:30 ET). Dial in details are below for the conference call. The webcast can be accessed on the Group’s website: www.candcgroupplc.com.

UK: +44 333 300 0804
Ireland: +353 1 431 1252
USA: +1 631 913 1422
Passcode: 56687475#

For all conference call replay numbers, please contact FTI Consulting.

Contacts

C&C Group plc
Patrick McMahon | Chief Financial Officer
Ewan Robertson | Finance & IR Director
Email: ewan.robertson@candcgroup.com

FTI Consulting
Jonathan Neilan/Paddy Berkery
Tel: +353 1 765 0886
Email: CandCGroup@fticonsulting.com

Novella Communications
Tim Robertson/Fergus Young
Tel: +44 203 151 7008
Email: TimR@novella-comms.com

About C&C Group plc
C&C Group plc is a leading, vertically integrated premium drinks company which manufactures, markets and distributes branded beer, cider, wine, spirits, and soft drinks across the UK and Ireland.

  • C&C Group’s portfolio of owned/exclusive brands include: Bulmers, the leading Irish cider brand; Tennent’s, the leading Scottish beer brand; Magners the premium international cider brand; as well as a range of fast-growing, super-premium and craft ciders and beers, such as Heverlee, Menabrea, Five Lamps and Orchard Pig. C&C exports its Magners and Tennent’s brands to over 40 countries worldwide.

  • C&C Group has owned brand and contract manufacturing/packing operations in Co.Tipperary, Ireland and Glasgow, Scotland.

  • C&C is the No.1 drinks distributor to the UK and Ireland hospitality sectors. Operating under the Matthew Clark, Bibendum, Tennent’s and C&C Gleeson brands, the Group supplies over 35,000 pubs, bars, restaurants and hotels, and is a key route-to-market for major international beverage companies.

  • C&C Group also has an investment in the Admiral Taverns tenanted pub group, which owns c.1,600 pubs across England & Wales.

C&C Group is headquartered in Dublin and is listed on the London Stock Exchange.

Note regarding forward-looking statements
This announcement includes forward-looking statements, including statements concerning current expectations about future financial performance and economic and market conditions which C&C believes are reasonable. However, these statements are neither promises nor guarantees, but are subject to risks and uncertainties, including those factors discussed on page 16 that could cause actual results to differ materially from those anticipated.

Financial review

A summary of results for the six months ended 31 August 2021 is set out in the table below:

Period ended
31 August
2021(i)

Period ended
31 August
2020(i)

CC Period ended
31 August
2020(i)(ii)

€m

€m

€m

Net revenue

657.3

386.7

398.4

Operating profit/(loss)

16.0

(11.7)

(13.2)

Net finance costs

(8.5)

(10.3)

Share of equity accounted investments’ loss after tax

(0.4)

(3.4)

Profit/(loss) before tax

7.1

(25.4)

Income tax expense

(1.3)

-

Profit/(loss) for the financial period

5.8

(25.4)

Basic EPS(iii)

2.5 cent

(9.6) cent

Adjusted diluted EPS(iii)

1.6 cent

(7.6) cent

Net revenue increased 70.0% on a reported basis or 65.0% on a constant currency basis to €657.3m reflecting the progressive reopening of the hospitality sector during the latter months of the six-month period ended 31 August 2021. The Operating profit of the Group, before exceptional items, for the six-month period to 31 August 2021 was €16.0m and in line with the easing of on-trade restrictions, the Group returned to profitability in June.

The Group completed a successful Rights Issue in June 2021 issuing 81,287,315 New Ordinary Shares at 186 pence per New Ordinary Share, raising gross proceeds of £151.2m (€176.3m). Attributable costs of €8.6m were incurred. The Group maintains a robust liquidity position with available liquidity of €474.9m at the end of August 2021. Covenant waivers remain in place as outlined in Note 8 of the Group’s Condensed Consolidated Interim Financial Statements.

Finance costs, income tax and shareholder returns
Net finance charges before exceptional items of €8.5m (31 August 2020: €10.3m) were incurred in the six months ended 31 August 2021. Exceptional finance charges of €4.1m (31 August 2020: €2.9m) were also incurred in the current financial period directly associated with the Covenant waivers including waiver fees, increased margins payable and other professional fees associated with covenant waivers. The Group also recorded €0.1m of exceptional finance income with respect to interest earned on the promissory notes which were a component of the consideration on disposal of the Group’s US subsidiary, Vermont Hard Cider Company.

Income tax charge for the period, excluding the impact of exceptional items, was €1.3m. The income tax charge with respect to exceptional items was €0.1m (31 August 2020: credit €0.2m). In line with IAS 34 Interim Financial Reporting the effective tax rate for the period ended 31 August 2021 was 17.3% excluding share of equity accounted investments loss after tax. The effective tax rate is influenced by several factors including the mix of profits and losses generated across the main geographic locations and carried forward losses on which no deferred tax has been recognised.

Due to the ongoing impact of COVID-19, no final dividend was paid with respect FY2021 and no interim dividend is being declared with respect to FY2022. In the prior financial period, due to the emergence of COVID-19 no final dividend was paid with respect FY2020 and no interim dividend was declared with respect to FY2021.

Exceptional items
The Group has incurred an exceptional credit on a before tax basis of €3.4m in the current financial period. This includes €4.1m of exceptional finance charges as outlined above. Also included is a credit of €3.0m directly related to the COVID-19 pandemic. The Group reviewed the recoverability of its debtor book and booked a credit of €1.8m with respect to its provision against trade debtors. The Group also recognised a credit of €1.2m relating to the disposal of inventory, which had been previously been deemed obsolete in FY2021, as a consequence of the COVID-19 restrictions.

The Group also recognised a credit of €2.0m in the current financial period as a direct consequence of the optimisation of the delivery networks in England and Scotland, primarily relating to a profit of €1.8m arising from the disposal of a property.

Costs attributable to the Rights Issue completed in June 2021 of €8.6m were incurred of which €6.6m was debited directly to Equity and €2.0m was recorded as an exceptional charge in the Group’s Condensed Income Statement.

The disposal of the Group’s wholly owned US subsidiary, Vermont Hard Cider Company to Northeast Kingdom Drinks Group, LLC on the 2 April 2021 for a total consideration of €17.1m (USD 20.0m) realised a profit of €4.5m. Also included within exceptional items is €0.1m of exceptional finance income with respect to interest earned on the promissory notes which were a component of the consideration on disposal.

The Group incurred a charge of €0.1m with respect to its share of Admiral Taverns’ exceptional items, the Group’s equity accounted investment.

Cashflow
Summary cash flow for the six months ended 31 August 2021 is set out in the table below. Strong working capital discipline and the Group’s inherent cash generation capability resulted in a free cash inflow of €26.2m pre-exceptional and a related free cash flow conversion of 85.1%.

The increase in the Group’s receivables purchase programme, as a direct consequence of increased trading, is a key driver of the working capital inflow in the period. The contribution to period end Group cash from the receivables purchase programme was €115.6m compared to €45.0m at 28 February 2021 (this represents a cash inflow of €70.1 m on a constant currency basis in the six month period to 31 August 2021).

Six months ended
31 August 2021

Six months ended
31 August 2020

€m

€m

Operating profit/(loss)

19.0

(14.5)

Exceptional items

(3.0)

2.8

Operating profit/(loss) before exceptional items

16.0

(11.7)

Amortisation and depreciation charge

14.8

16.6

Adjusted EBITDA(iv)

30.8

4.9

Cash flow summary

Adjusted EBITDA

30.8

4.9

Tangible / intangible net expenditure

(11.4)

(5.5)

Exceptional net proceeds on disposal of tangible assets

2.3

-

Advances to customers

1.5

(0.4)

Working capital movement

10.9

(25.7)

Income taxes (paid)/received

(0.8)

5.7

Exceptional items paid

(4.0)

(2.8)

Net finance costs paid

(8.8)

(7.6)

Exceptional finance costs paid

(4.8)

(1.2)

Pension contributions paid

(0.2)

(0.2)

Other*

4.2

0.4

Free Cash Flow(v) (FCF)

19.7

(32.4)

FCF exceptional cash outflow

6.5

4.0

FCF excluding exceptional cash outflow

26.2

(28.4)

Reconciliation to Condensed Consolidated Cash Flow Statement

Free Cash Flow

19.7

(32.4)

Cash outflow re acquisition of equity accounted investments /financial asset

-

(6.8)

Proceeds from sale of business

12.9

-

Proceeds from exercise of share options/sale of equity interests

0.7

-

Payment of debt issue costs

-

(1.4)

Proceeds from Rights Issue

176.3

-

Payment of Rights Issue costs

(8.6)

-

Payment of lease liabilities

(9.8)

(9.6)

Drawdown of debt

9.5

351.6

Repayment of debt

(220.1)

(216.7)

Net (decrease)/increase in cash

(19.4)

84.7

* Other primarily relates to the add back of share options, pensions debited to operating profit/(loss), exceptional rights issue costs and net profit on disposal of property, plant and equipment.

Pensions

In compliance with IFRS, the net assets and actuarial liabilities of the various defined benefit pension schemes operated by Group companies, computed in accordance with IAS 19(R) Employee Benefits, are included on the Condensed Consolidated Balance Sheet as retirement benefits.

At 31 August 2021, the Group is reporting a retirement benefit surplus of €18.8m (31 August 2020 net surplus: €6.8m, 28 February 2021 net surplus: €4.9m). All schemes are closed to new entrants. There are 2 active members in the Northern Ireland (‘NI’) scheme and 52 active members (less than 10% of total membership) in the Republic of Ireland (‘ROI’) schemes. The Group has an approved funding plan in place, the details of which are disclosed in note 11 of the Condensed Consolidated Interim Financial Statements. The most recent actuarial valuations of the ROI defined benefit pension schemes were carried out with an effective date of 1 January 2021. An actuarial valuation of the NI defined benefit pension scheme is currently in progress.

Arising from the formal actuarial valuations of the Group’s staff defined benefit pension scheme, the Group has committed to contributions of €418,000 per annum commencing in 2021 and increasing at a rate of 1.4% each year thereafter. This will be reviewed at the next actuarial valuation, which is due in the normal course of events at 1 January 2024. There is no funding requirement with respect to the Group’s ROI executive defined benefit pension scheme or the Group’s NI defined benefit pension scheme, both of which are in surplus.

The key factors influencing the change in valuation of the Group’s defined benefit pension scheme obligations are as outlined below:

€m

Net surplus at 1 March 2021

4.9

Employer contributions paid

0.2

Current service cost

(0.4)

Net interest cost on scheme liabilities/assets

0.1

Experience gains and losses on scheme liabilities

11.2

Effect of changes in financial assumptions

(12.3)

Actual return less Interest income on scheme assets

15.0

Translation adjustment

0.1

Pension surplus at 31 August 2021

18.8

The increase in the net surplus of the Group’s defined benefit pension schemes from the 28 February 2021, to the 31 August 2021, as computed in accordance with IAS 19(R) Employee Benefits is primarily due to an increase in asset values over the six-month period. The liability values have remained relatively stable over the six-month period as the increase in the liability, due to the changes in financial assumptions, have been largely offset by experience gains, which incorporated the membership data update that was factored into the actuarial funding valuation on 1 January 2021.

Foreign currency and comparative reporting

Six month period ended
31 August 2021

Six month period ended
31 August 2020

Translation exposure

Euro:Stg£

0.859

0.894

Euro:US$

1.194

1.124

Comparisons for revenue, net revenue and operating profit/(loss) before exceptional items for each of the Group’s reporting segments are shown at constant exchange rates for transactions by subsidiary undertakings in currencies other than their functional currency and for translation in relation to the Group’s sterling and US dollar denominated subsidiaries by restating the prior period at current period effective rates.

The impact of restating currency exchange rates on the results for the period ended 31 August 2020 is as follows:

Period ended
31 August 2020
€m

FX
Transaction
€m

FX
Translation
€m

Period ended
31 August 2020
Constant currency
comparative
€m

Revenue

Ireland

144.0

-

0.9

144.9

Great Britain

185.5

-

7.5

193.0

International

13.5

-

(0.5)

13.0

Matthew Clark and Bibendum

198.4

-

8.1

206.5

Total

541.4

-

16.0

557.4

Net revenue

Ireland

90.7

-

0.7

91.4

Great Britain

103.9

-

4.2

108.1

International

13.1

-

(0.5)

12.6

Matthew Clark and Bibendum

179.0

-

7.3

186.3

Total

386.7

-

11.7

398.4

Operating profit/(loss)(i)

Ireland

1.6

(0.8)

-

0.8

Great Britain

6.2

-

0.3

6.5

International

-

-

-

-

Matthew Clark and Bibendum

(19.5)

(0.2)

(0.8)

(20.5)

Total

(11.7)

(1.0)

(0.5)

(13.2)

Notes to the Finance Review are set out below.

  1. Before exceptional items.

  2. H1’21 comparative adjusted for constant currency (H1 FY2021 translated at H1 FY2022 F/X rates) as outlined on page 15.

  3. Adjusted basic/diluted earnings/(loss) per share (‘EPS’) excludes exceptional items. As outlined in detail in note 5 of the Group’s Condensed Consolidated Interim Financial Statements, both the current period and comparative period EPS calculations include an adjustment to the number of shares outstanding before the Rights Issue to reflect the bonus element inherent in it and to ensure both the current period calculation and the prior period calculation are on a comparable basis.

  4. Adjusted EBITDA is earnings/(loss) before exceptional items, finance income, finance expense, tax, depreciation, amortisation charges and equity accounted investments’ (loss)/profit after tax. A reconciliation of the Group’s operating profit/(loss) to EBITDA is set out on page 13.

  5. Free Cash Flow ("FCF") that comprises cash flow from operating activities net of tangible and intangible cash outflows/inflows which form part of investing activities. FCF highlights the underlying cash generating performance of the ongoing business. FCF benefits from the Group’s purchase receivables programme which contributed €115.6m (28 February 2021: €45.0m; 31 August 2020: €89.4m) to cash in the period. A reconciliation of FCF to net movement in cash per the Group’s Cash Flow Statement is set out on page 13.

Principal risks and uncertainties

We have an established risk management process to identify, assess and monitor the principal risks that we face as a business. We have performed a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.

The Directors consider that the principal risks and uncertainties which could have a material impact on the Group's performance in the remaining 26 weeks of the financial year, other than those noted below, remain substantially the same as those stated on pages 32 to 40 of the Group's Annual Financial Statements for the year ended 28 February 2021, which are available on our website, http://www.candcgroupplc.com.

COVID-19 continues to be a significant risk for the Group. Like businesses across many sectors and specifically the drinks industry, government-imposed restrictions, while necessary to slow the spread of COVID-19 have had a significant impact on the Group’s outcomes, principally the on-trade, as well as the Group’s employees, many of whom were furloughed for a period. While restrictions have eased in the Group’s primary geographies, in the latter half of current financial period, the situation continues to evolve and the Board continues to closely monitor the impact of COVID-19 and the guidance of governments and health authorities.

Our Matthew Clark and Bibendum ("MCB") business was impacted by an IT incident in April 2021, this was isolated within this business and the rest of the Group was unaffected. We managed to maintain service during this period, ensuring that the business was fully operational again for the full re-opening of the on-trade in the United Kingdom in May 2021. The incident has emphasised the need for continued focus on information security and the Group has subsequently conducted a review of its IT security processes and is implementing its findings where appropriate.

Directors’ responsibility statement in respect of the half-yearly financial report for the six months ended 31 August 2021

We confirm our responsibility for the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules ("DTR") of the Financial Conduct Authority (‘FCA’) and with IAS 34 Interim Financial Reporting as adopted by the EU, and that to the best of our knowledge:

  • the condensed set of financial statements comprising the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes in Equity and the related notes have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

  • the interim management report includes a fair review of the information required by:

    1. DTR 4.2.7R,

      • being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and,

      • a description of the principal risks and uncertainties for the remaining six months of the year; and

    2. DTR 4.2.8R,

      • being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and,

      • any changes in the related party transactions described in the last Annual Report that could do so.

The directors of C&C Group plc, and their functions, are listed in the Group’s Annual Financial Statements for the year ended 28 February 2021, with the exception of the following changes during the period:

  • Vineet Bhalla was appointed a non-executive Director on 27 April 2021;

  • Andrea Pozzi resigned as a Director on 1 September 2021; and,

  • Jim Clerkin resigned as a non-executive Director on 27 October 2021.

The Group’s auditor has not audited or reviewed the Condensed Consolidated Interim Financial Statements or the remainder of the half-yearly financial report.

On behalf of the Board

S. Gilliland
Chair

D. Forde
Chief Executive Officer

28 October 2021

Condensed Consolidated Income Statement
for the six months ended 31 August 2021

Six months ended 31 August 2021
(unaudited)

Six months ended 31 August 2020
(unaudited)

Notes

Before
exceptional
items
€m

Exceptional
items
(note 4)
€m

Total
€m

Before
exceptional
items
€m

Exceptional
items
(note 4)
€m

Total
€m

Revenue

2

831.8

...

831.8

541.4

-

541.4

Excise duties

(174.5)

-

(174.5)

(154.7)

...

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