C&C Group plc, the leading manufacturer, marketer and distributor of branded cider and beer announced results for year ended 28 February 2013, identifying considerable pressure for its cider brands in the UK – the state of the economy, the weather, and competition all contributing – though beer sales help to compensate. Progress of its major cider acquisition in the USA will be watched with interest in the year ahead.
Financial Highlights
- Operating profit before exceptional items increased 2.4% to €113.9m
- Group operating margin of 23.9%, up 0.8ppts on prior year
- Net revenue declined 0.8% to €476.9m
- Net debt of €123.4m at the year end giving a leverage ratio to EBITDA of 0.9x
- Adjusted diluted Earnings Per Share (EPS) for continuing operations increased 0.4% to 27.7 cent
- Proposed final dividend increase of 5.6% to 4.75 cent per share, delivering 7.1% growth in full year
- dividend to 8.75 cent per share
Operating Highlights
- Resilient performance of Group despite difficult trading environment in United Kingdom (UK) and Republic of Ireland (ROI)
- Strong Tennent’s performance helping to offset challenging core cider markets
- Caledonia Best is now the fastest growing beer brand in the Scottish on-trade; over the last year it has reached No.2 position in the smooth draught ale category according to CGA
- Stable trading in the second half of the year in ROI
- International volume growth of 55.2%, including acquisitions, representing 9.6% of total branded volumes
- Tennent’s demonstrating meaningful international potential in first full year of trading
- Robust cost control and operational efficiency improvements helping to protect margins
Strategic Highlights
- Announced and completed the acquisition of Vermont Hard Cider Company, LLC (VHCC), the leading US craft cider company, for a gross consideration of US$305.0m (€230.9m). The new business contributed €1.8m of operating profit since completion on 21 December 2012
- Completion of an accelerated integration of the Magners USA commercial infrastructure into the VHCC business
- Announced the acquisition of the Gleeson Group, a leading supplier and distributor of beverages in Ireland, for an enterprise value of €58.0m. The deal successfully completed on 7 March 2013
- Creation of the Shepton Mallet Cider Mill trading division after the year end to support the development of regional, craft and specialist cider brands such as Addlestones, Blackthorn and Olde English
- Significant on-trade loan activity (€16.7m incremental investment) in core markets in response to growing customer demand
Performance Review & Outlook
Stephen Glancey, C&C Group CEO, commented:
“Our results are in line with stated guidance and while it has not been an easy year for our core cider brands, with poor weather and increased competition, particularly in the UK, the second half did bring some trading stability in Ireland.
We have had an excellent contribution from the Tennent’s brand both in domestic and international
Markets, providing some balance to the increased competition within UK cider.
Our International business delivered strong growth with volumes increasing by over 55% in the year.
The period was defined by two significant investments. In the USA we acquired the Vermont Hard Cider Company, increasing the Group’s exposure to an emerging category in a major potential market. Then in Ireland, just after the year end, we acquired the leading wholesaler Gleesons. This demonstrates our long term belief in Ireland as a place to invest and gives C&C a platform for domestic growth for the first time in many years.
Our operating model remains decentralised with local management sharply focused on local consumers and customers. In the US we are pleased to have retained the services of Bret Williams and Dan Rowell and have re-established a local board structure comprising management and non-executives with deep industry experience to provide oversight and governance.
In our domestic markets we continue to develop multi-beverage capability investing in customers and providing support through a trade lending model, advancing €16.7m in the year. The creation of the Shepton Mallet Cider Mill trading division is a positive step towards capitalising on the latent potential of the Gaymers portfolio and will be an important feature in the next phase of cider growth.
A fundamental tenet of C&C is to completely align the interests of our employees with shareholders, and senior management are incentivised mainly through equity based reward. While no bonus was paid to Directors this year, 43% of our employees at local level were rewarded for performance with an average payment of €2,700.
We are also proud of the fact that over 50% of our employees are participating in our partnership share scheme.
To support further equity, Executive Directors are waiving their FY2014 share incentive awards for re-distribution to operating management within the business. We believe this to be in the long term interests of all shareholders.
C&C has a resilient business model focused on value creation through strong brand market combinations. We have made significant investment this year aimed at strengthening our business in both new and existing markets.
FY2014 will inevitably be a transition period as we integrate our recently acquired businesses. C&C will continue to deliver earnings growth to sustain long term growth objectives.”
About C&C Group
C&C Group plc is a leading manufacturer, marketer and distributor of branded long alcoholic drinks. The Group manufactures Bulmers, the leading Irish cider brand, Magners, the premium international cider brand, the Gaymers cider range of branded and private label ciders and the Tennent’s beer brand. C&C Group also owns Woodchuck and Hornsby’s, two of the leading craft cider brands in the United States. The Group also distributes a number of beer brands in the Scottish, Irish and Northern Irish markets, primarily for Anheuser-Busch InBev.