INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2024

Earnings in line and on track to meet full year expectations

Reconfirm commitment to returning €150m to shareholders over the next three years

29 October 2024 | 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 results for the six months ended 31 August 2024 ('HY2025').  The Group's portfolio includes market-leading brands such as Tennent's, the #1 beer brand in Scotland, Bulmers the #1 cider brand in Ireland, as well as a growing collection of curated premium craft beers and ciders, together with Matthew Clark and Bibendum ('MCB'), the leading distributor to the UK hospitality sector.

FINANCIAL HIGHLIGHTS

C&C is pleased to report results in line with expectations despite poor summer weather and subdued market conditions in HY2025. 

·      Overall marginal net revenue decline of -3%ⁱ reflecting the disposal of our non-core soft drinks business in Ireland, lower contract brewing volumes and softer cider volumes in GB.

·      Encouraging net revenue growth of +2%ⁱⁱ in Matthew Clark & Bibendum demonstrating customer recovery and growth momentum in our distribution channel.

·      Underlying Group operating profit before exceptional items increased +29% (+€9.1m) to €40.3m in HY2025ⁱⁱⁱ.

·      Operating margins improve to 4.7% with initiatives to drive group wide efficiencies underway and progressing well.

·      Continued balance sheet strength with leverage ratio of 1.1x^iv and improvement in free cashflow generation.

OPERATING HIGHLIGHTS

·      Core brands Tennent's and Bulmers gain on-trade market share^vi further cementing market-leading positions.

·      Premium brands delivered double-digit revenue growth with Menabrea +17% and Orchard Pig +20%.

·      MCB August customer numbers +10%^v year on year with high customer retention levels.

·      Distribution service levels consistently high, >97% deliveries made On Time and >95% delivered In Full^vii; transition to a new state-of the-art depot facility at Orbital West, London facilitating subsequent service level improvements.

OUTLOOK & CAPITAL RETURNS

·      On track to achieve €80m operating profit for FY2025 with cost efficiencies in H1 to further enhance margins in H2.

·      We retain a target of €100m operating profit in FY2027.

·      Interim dividend of 2.00c (HY2024: 1.89c) up 6% vs prior year, demonstrating commitment to a progressive dividend policy.

·      Share buybacks and dividends announced to date represent €38m of our commitment to return a minimum of €150m to shareholders over the next three years.

·      Appointed Feargal O'Rourke (15 August 2024) and Sanjay Nakra (19 September 2024) as Non-Executive Directors.

·      The recruitment process for a new CEO is underway.

FINANCIAL KPIs

Constant currency basis

* As previously reported in June 2024, the Group identified a number of accounting errors which have resulted in the restatement of results for the 31 August 2023 (HY2024) reporting period. The net result of these restatements has been the reallocation of €7.6m of operating profit from H2 to H1 in FY2024. Further details of this are provided in Note 15.

Ralph Findlay, Chair and Chief Executive Officer, commented:

"I am pleased to report earnings in-line with expectations in HY2025 as we rebuild performance and momentum within the business. Despite unfavourable summer weather, our brands demonstrated inherent appeal and resilience with both Tennent's and Bulmers growing market share and Menabrea and Orchard Pig achieving double digit revenue growth.

I am also encouraged that we achieved significant growth in distribution in Matthew Clark and Bibendum with customer numbers in August +10% vs the prior year. We continue to make improvements with regards to customer service, which underpins our customer acquisition strategy.

As we enter the busy Christmas and New Year trading period, we are committed to delivering outstanding service, winning customers, continuing to simplify the business and to further improve operating efficiency."

ENDS

Notes to Highlights

^i.-3% vs previously published net revenue on constant currency basis, -2% vs restated net revenue on constant currency basis.

^ii.+2% vs previously stated net revenues on constancy currency basis

^iii.+29% vs previously published operating profit on constant currency basis, +4% vs restated operating profit on constant currency basis

^iv.Net Debt / Adjusted EBITDA post-IFRS 16

^v.England & Wales on trade delivered outlets Aug-24 vs Aug-23

^vii.CGA Scotland On Trade Beer 28 w/e 07.09.24, CGA Ireland Total Cider On Trade 26 w/3 31.08.24

^viii.On-Time and On-Time In-Full Metrics from 1.03.24 - 31.08.24

OPERATING REVIEW

BRANDED

Branded business revenue declined 9.1% in the period to €172.3m.  This reflects a stable performance from our core brands and growth in our premium brand portfolio, offset by decline in the GB cider portfolio and lower contract manufacturing volume.  Operating profit was €26.1m up +1.1% year on year against previously published results and down 30% against the restated comparator which reallocated profit from H2 to H1 (see note 15).

GB

Tennent's markedly outperformed total beer performance in the on-trade channel, increasing market share by a further 5ppts in the latest 12-week summer periodⁱ to 10 August 2024. Tennent's net revenues were broadly flat in the period with pricing offsetting a volume decline of 7%. Brand investment in the period centred on the Euro 2024 football tournament, leveraging Tennent's sponsorship of the Scottish FA team. Despite positive share gains for the brand, overall beer consumption in Scotland declined over the latest 12-week period, with volumes in the on trade -9.3%. Whilst the inclement weather undoubtedly impacted beer consumption, the 200,000 Scottish fans who travelled to Germanyⁱⁱ will also have had a temporary impact on the market.

From 1 January 2025, we will reassume control and distribution of Magners and our wider cider portfolio in Great Britain as part of a wider reorganisation of our trading relationship with BBG. This will provide us with the opportunity to strengthen cider brand performance as we plan to stabilise and enhance performance. Magners volumes have remained under pressure in the period, down 10%, with the lack of sunshine in the summer months influencing cider consumption in GB, particularly in the off-trade channel where total cider volumes are -8.5%ⁱⁱⁱ in the most recent 12-week period.

Our premium brands delivered significant revenue growth in the period, with Menabrea +17% and Orchard Pig +20%. Development of these brands, particularly in England and Wales, remains a strategic focus for the business, with the white-space opportunity representing meaningful value growth. Accordingly, we are currently increasing investment in these brands as we seek to capitalise on growth in the premium segment of the market.

Ireland                                                              

Bulmers net revenues in the period were -3.5%.  As in GB, the summer weather in Ireland was poor and affected total cider market volumes, with both on and off trade volumes in decline at -13.5% and -8.1% respectively in the latest 12-weeks^iv. Positively, Bulmers has offset some of the category declines with share gains in HY2025 in the on-trade^v.. 

Operational

As part of our objective to streamline and simplify business operations, we disposed of our soft drinks business in the period by way of a management buy-out. This portfolio was becoming increasingly peripheral to our strategic ambitions and presented an opportunity to remove complexity from our network.

DISTRIBUTION

Performance in Distribution has been encouraging in HY2025 with recovery in GB following last year's ERP disruption. Ongoing commitment to improving customer service and experience underpins our customer acquisition strategy. Volume performance was influenced by category mix changes as consumers gravitated towards beer at the expense of higher margin categories including wines and spirits.  Despite this, operating profit margins improved in the first half as we rebuild towards a 3.5% target.

GB

Net revenue of the GB distribution business was broadly flat year on year, reflecting sales mix changes offset by significant volume growth, as described above.  We expect momentum to continue into the second half-year, underpinning our expectations for a more significant H2 weighting in terms of profit, supported by the cost efficiency actions, initiated in H1.

Matthew Clark and Bibendum customer numbers were +10% as at 31 August 2024, with high customer retention, customer gains and expansion of key customers such as Admiral Taverns contributing to this positive performance. While customer service is a major factor, product range is also important and in the first half-year we introduced the award-winning Sir Davis Whiskey by Beyoncé on an exclusive basis to the off trade in Scotland, demonstrating our outstanding distribution capability.

In the wider market GB on trade volumes were down 2.8% on an MAT basis, with declines in wine (-7.9%) and spirits (-10.7%) reflecting pressure on discretionary spend. Encouragingly, C&C outperformed the market with share of GB on trade volume up 0.7ppts on an MAT basis, and by 0.9% in the past 12-weeks (+0.9ppts)^vi.

Ireland

Net revenue of the Ireland ("IOI") distribution business was down 6.5% with volumes down 10.1% driven primarily by the performance of Budweiser Brewing Group ("BBG") brands. As previously announced, we have reviewed our trading relationship with BBG such that we will transfer control and distribution of BBG's brands in the IOI off trade to BBG and reclaim control and distribution of our cider brands (including Magners) in England and Wales from January 2025. We will continue to supply BBG products exclusively in the on trade and to select customers in the off trade.  We plan to reinvest in Magners in the second half, ready for the summer season and invigorate this brand back into growth.

Performance in our wines and spirits wholesale business have been good, with net revenues up 6% on modest volume growth of 2%.  This is supported by the continued roll-out of our Bibendum range in the Republic of Ireland, including several 5-star hotels (Shelbourne Hotel - Dublin, Intercontinental Hotel - Dublin, and Dromoland Castle - Clare).

Operational

Optimisation and investment in our distribution infrastructure remains a critical component of our capital allocation framework and we were pleased to transition to our new, state-of the-art Orbital West depot facility in London in February 2024.  The move has supported a sustained improvement in services levels in HY2025.  The 114k square feet site provides us with capacity to grow our customer base in the London area and beyond.  In time, this depot will develop into our South network 'hub', allowing us to realise further working capital efficiencies through improved stock management.

CURRENT TRADING & OUTLOOK

Trading conditions remain tough, and sentiment regarding the UK autumn Budget (30 October 2024) has generated some consumer caution however, positively, we have well executed plans in place for the Christmas and New Year period, as well as encouraging trading momentum. 

Furthermore, we look forward to regaining control of our cider portfolio in GB from January and are focused on investment plans and strategic initiatives to reinvigorate the Magners brand.  More generally, we are focused on achieving our targets for the current financial year and generating value for our shareholders over the longer term.

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, premium and craft ciders and beers, including Menabrea 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 through the Matthew Clark, Bibendum, Tennent's and Bulmers Ireland brands, the Group has a market-leading range, scale and reach including an intimate understanding of the markets it serves. Together this provides a key route-to-market for major international beverage companies.

C&C Group is a FTSE 250 company headquartered in Dublin and is listed on the London Stock Exchange.

Notes to Operating Review

^i.Scotland On Trade CGA OPM, 12 w/e 10.08.24

^ii.www.bbc.com; www.thescottishsun.co.uk

^iii.CGA OPM (BWS) 12 w/e 10.08.24

^iv.ROI On Trade CGA OPM 12 w/e 31.08.24, ROI Off Trade CGA OPM 12 w/e 31.08.24

^v.CGA Ireland Total Cider On Trade 26 w/3 31.08.24

^vi.CGA OPM (BWS) 52 w/e 10.08.24; C&C GB distribution (BWS) 52 w/e 10.08.24

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 the Group believes are reasonable. However, these statements are neither promises nor guarantees, but are subject to risks and uncertainties, that could cause actual results to differ materially from those anticipated.

Certain figures contained in this announcement, including financial information, may have been subject to rounding adjustments and foreign currency conversions. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly to the total figure given.

Webcast Details | Analysts & Institutional Investors

C&C Group plc will host a webcast for analysts and institutional investors, today, 29 October 2024, at 0830 hours.  Please contact candccapmkts@instinctif.com for webcast joining details.

Contacts

C&C Group plc

Email: investor.relations@candcgroup.ie

Investors, Analysts & UK Media:

Instinctif Partners

Justine Warren / Hannah Scott / Amelia Thorn

Tel:   020 7457 2020

Email: C&CGeneral@instinctif.com

Irish Media

FTI Consulting

Jonathan Neilan / Paddy Berkery / Niamh O'Brien

Tel:   +353 86 231 4135 / +353 86 602 5988 / +353 87 707 8379

Email: C&CGroup@fticonsulting.com

Financial Review

A summary of results for the six months ended 31 August 2024 is set out in the table below:

Net revenue decreased 0.4% on a reported basis or 2.0% on a constant currency basis to €861.4m.  Revenue growth reflects gains in market share for Tennent's and Bulmers and strong growth in premium brands, together with customer expansion and improved service levels across the Group's Distribution business. The operating profit of the Group, before exceptional items, for the six-month period to 31 August 2024 was €40.3m compared to €38.1m in the prior period aided by the Group's Transformation programme driving efficiencies and improving productivity.  

The Group maintains a robust liquidity^(vi) position with available liquidity^(vi) of €367.9m at 31 August 2024 (31 August 2023: €341.6m). The reported net debt: Adjusted EBITDA ratio was 2.1x. The Group's financial covenants are calculated on a pre-IFRS 16 basis, and the outcomes for these as at 31 August 2024 were net debt (excluding leases): Adjusted EBITDA ratio of 1.1x and an interest cover ratio of 4.6x. 

Basic EPS has decreased by 29.8% compared to the same prior financial period, with adjusted diluted EPS increasing by 5.4%.

Prior year results have been restated as previously described in the Group's FY2024 Annual report published on 27 June 2024. These adjustments in aggregate represented an underlying operating profit adjustment credit of €7.6m before exceptional items and further detail is provided in Note 15 of these interim financial statements.

Finance costs, income tax and shareholder returns

Net finance charges before exceptional items of €11.7m (31 August 2023: €9.8m) were incurred in the six months ended 31 August 2024. Of the €11.7m net finance cost, €2.8m relates to the Group's debtor securitisation facility (31 August 2023: €2.3m), €1.9m relates to USPP notes (31 August 2023: €1.8m), €3.5m relates to the Group's main bank lending facilities (31 August 2023: €2.3m), €3.6m relates to lease interest (31 August 2023: €1.6m), €0.4m relates to amortisation of prepaid debt issue costs (31 August 2023: €0.9m) and (€0.5m) relates to other interest income (31 August 2023: €0.9m).

The Group also recorded a net €0.1m (31 August 2023: €0.9m) of exceptional finance costs which comprised €0.2m of costs associated with the interest discount impact on onerous contract provisions from prior periods, offset by €0.1m of income earned on the promissory notes which were a component of the consideration on disposal of the Group's US subsidiary, Vermont Hard Cider Company. In the period to 31 August 2023, exceptional finance charges of €1.0m were incurred directly associated with increased utilisation of the Group's debtor securitisation facility as a consequence of increased cash requirements from the impact associated with the ERP system implementation disruption in the Group's GB distribution business.

Income tax expense for the period, excluding the impact of exceptional items, was €5.9m (31 August 2023: €6.1m). The income tax credit with respect to exceptional items was €2.4m (31 August 2023: €1.0m). In line with IAS 34 Interim Financial Reporting the effective tax rate for the period ended 31 August 2024 was 21.3% (31 August 2023: 21.8%). The effective tax rate is influenced by several factors including the mix of profits and losses generated across the main geographic locations.

The Board declared a full and final dividend of 3.97 cent per ordinary share (2023: 3.79 cent per ordinary share) which was paid to shareholders on 23 August 2024 equating to a distribution of €13.4m (2023: €14.9m), all of which was paid in cash.

The Board has announced an interim dividend of 2.00 cent per share for the period ended 31 August 2024. Payment will be on 13 December 2024 to ordinary shareholders registered at the close of business on 15 November 2024. Using the number of shares in issue at 31 August 2024 and excluding those shares for which it is assumed that the right to dividend will be waived, this would equate to a distribution of €7.7m. There is no scrip dividend alternative proposed

Exceptional items

The Group has incurred an exceptional charge on a before tax basis of €12.2m in the current financial period including €7.6m in respect of strategic restructuring programmes for logistics (€4.2m) and group transformation (€3.4m). The logistics charge follows the closure of two distribution centres in the UK, Crayford and Newbridge, during the period and group transformation costs include the closure of the Group's Borrisoleigh depot in Ireland following its exit from the soft drinks business during FY24 and further on-going redundancy costs for right-sizing of the business moving forward. An additional €4.2m of cost was incurred for risk management and control reviews arising from restatement issues associated with prior reporting periods, further detail of which is set out in note 4 of these interim financial statements.

Cashflow

Summary cash flow for the six months ended 31 August 2024 is set out in the table below. Free cashflow has improved by €15.8m compared to the prior period, which was significantly impacted by disruption resulting from issues with the ERP system implementation in the Group's GB distribution business. The Group generated a free cash inflow of €19.4m pre-exceptional and a related free cash flow conversion of 34%.

The Group maintains a £150.0m receivables securitisation facility (£120.0m committed, £30.0m uncommitted) renewable annually in May. As at 31 August 2024, €115.6m of this facility was drawn (29 February 2024, €105.9m; 31 August 2023 €121.7m).

* Other primarily relates to the add back of share options, pensions debited to operating profit, 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 Employee Benefits, are included on the Condensed Consolidated Balance Sheet as retirement benefits.

At 31 August 2024 the Group had a retirement benefit surplus of €33.9m (31 August 2023 net surplus: €37.8m, 29 February 2024 net surplus: €34.3m). All schemes are closed to new entrants. There are 2 active members in the Northern Ireland ('NI') scheme and 44 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 2024 while the date of the most recent actuarial valuation of the NI defined benefit pension scheme was 31 December 2023.

Arising from the formal actuarial valuations of the Group's staff defined benefit pension scheme, the Group committed to contributions of €287,000 per annum commencing in 2024 and increasing at a rate of 2.3% each year thereafter. This will be reviewed at the next actuarial valuation, which is due to be completed in the normal course of events on 31 October 2027. 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:

The decrease in the net surplus of the Group's defined benefit pension schemes from the 29 February 2024 to 31 August 2024, as computed in accordance with IAS 19 Employee Benefits relates to an increase in liabilities due to a marginal decrease in bond yields over the six-month period.

Foreign currency and comparative reporting

Comparisons for revenue, net revenue and operating profit 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 (GBP) and US dollar (USD) 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 2023 is as follows:

Relative foreign exchange rate movements in the 6-month period would give rise to a negligible transactional foreign exchange impact.

Notes to the Financial Review are set out below

(i)            Before exceptional items.

(ii)           H1 FY2023 comparative adjusted for constant currency (H1 FY2023 translated at H1 FY2024 FX rates) as outlined on page 10.

(iii)          Adjusted diluted earnings per share ('EPS') exclude exceptional items, as outlined in Note 5 of the Group's Condensed Consolidated Interim Financial Statements.

(iv)          Adjusted EBITDA is earnings before exceptional items, finance income, finance expense, tax, depreciation, amortisation charges and equity accounted investments' profit/(loss) after tax. A reconciliation of the Group's operating profit to adjusted EBITDA is set out on page 8.

(v)           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 (29 February 2024: €105.9m; 31 August 2023: €121.7m) 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 8.

(vi)          Liquidity is defined as cash plus undrawn amounts under the Group's revolving credit facility.

(vii)         Adjusted basic earnings per share ('EPS') exclude exceptional items, as outlined in Note 5 of the Group's Condensed Consolidated Interim Financial Statements.

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 remain substantially the same as those stated on pages 34 to 40 of the Group's Annual Financial Statements for the year ended 29 February 2024, which are available on the Group's website, http://www.candcgroupplc.com.

Directors' responsibility statement in respect of the half-yearly financial report for the six months ended 31 August 2024

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:

(a)   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

(b)   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 Group during that period; and,

·      any changes in the related party transactions described in the last Group Annual Financial Statements that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

The Directors of C&C Group plc, and their functions, are listed in the Group's Annual Financial Statements for the year ended 29 February 2024, with the exception of the following changes:

·      Andrew Andrea was appointed as Chief Financial Officer and as an Executive Director on 1 March 2024. In addition, on 11 July 2024, Andrew was appointed to the newly established role of Chief Financial and Transformation Officer;

·      Patrick McMahon stepped down as Chief Executive Officer on 6 June 2024;

·      Ralph Findlay was appointed as Chief Executive Officer and stepped down as Chair of the Nomination Committee on 7 June 2024;

·      Chris Browne was appointed as Chair of the Nomination Committee on 7 June 2024;

·      Feargal O' Rourke was appointed as an independent, Non-Executive Director and a member of the Audit and Nomination Committee's on 15 August 2024 and 23 October 2024 respectively;

·      Sanjay Nakra was appointed as an independent, Non-Executive Director on 19 September 2024 and a member of the ESG and Audit Committee's on 23 October 2024.

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

Ralph Findlay                                                                                                           Andrew Andrea          

Chair & Chief Executive Officer                                          Chief Financial & Transformation Officer                

29 October 2024

Condensed Consolidated Income Statement (unaudited)                                     

for the six months ended 31 August 2024

  All of the results are related to continuing operations.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 31 August 2024 (unaudited)

Condensed Consolidated Balance Sheet (unaudited)

as at 31 August 2023

Condensed Consolidated Cash Flow Statement (unaudited)

for the six months ended 31 August 2024

A reconciliation of Net Debt is presented in Note 9.