C&C Group plc (‘C&C’ or the ‘Group’), a leading manufacturer, marketer and distributor of branded cider, beer, wine and soft drinks announced its results for the year ended 28 February 2015.
Stephen Glancey, C&C Group CEO, commented:
“Our core businesses in Ireland and Scotland, which represent 86% of operating profit, delivered modest earnings growth during the year. During the course of FY2015, we continued to make progress towards our objective of building leading brand-led distribution businesses in both of these regions. This model reinforces the sustainability of our earnings and cash generation capability which, in turn, drives our ability to create and sustain value for shareholders.
“Our integration with Gleeson in Ireland has now completed and we are making solid progress with Wallaces Express. In addition, we continue to invest behind our iconic Bulmers and Tennent’s brands.
“Outside of our core segments, we have been restructuring and investing behind our market positions and brands to drive performance. During the year, we have consolidated our C&C Brands business; accelerated our product investment and development in the US; and, made exciting progress in new international markets.
“Reflecting both the strength of our balance sheet and our free cash flow characteristics, we completed a €30 million share buyback in FY2015. Today, we announce an increased final dividend consistent with our commitment to provide certainty of value in the form of a progressive dividend stream. The medium term target is to increase the Group’s payout ratio to closer to 50% of earnings.
“In parallel, our objective is to continue to invest in the business to build durable value. We will continue to evaluate the available range of capital allocation opportunities to drive improved returns. Absent any significant capital allocation decisions, and to improve capital efficiency, we expect to move to a higher leverage multiple by the end of our FY2018 fiscal year with a target of approximately 2 times net debt to EBITDA within this time frame.
“Operationally, FY2016 is a period of stabilisation and investment. We have made a decent start in the early part of the year.”
Financial Overview
- Net revenue growth of 10.3% to €683.9 million
- Operating profit of €115million declined 9.2% but in line with stated guidance
- Solid performance in the core segments of Ireland and Scotland with operating profit growth of 1.5% and 1.8% respectively
- Challenging trading environments in C&C Brands and in the US leading to a decline in profitability in both segments. One off impairment charge of €150million to US asset value reflects the rebased profit level
- Strong cash flow generation with pre-exceptional Free Cash Flow of €85.7million, equating to 61.3% of EBITDA, representing an improvement of 9 ppts on prior year
- Strong balance sheet with Net Debt to EBITDA at 1.1x after €30million of share buy backs
- A recommended final dividend increase of 22.8% to 7.0 cent per share. Full year dividend growth of 15% and a pay-out ratio of 42.3%; a level considered appropriate to the cash generative characteristics of the business
Operational Overview
Core Segments: Ireland and Scotland
- Consolidation following Gleeson and Wallaces Express acquisitions delivered cost reduction in the year
- Strong portfolio performance with growth in ‘new brands’ (Heverlee, Caledonian, Clonmel 1650) and third party partner brands
- Passion for brands and quality reflected in awards for Clonmel 1650 and Tennent’s Gluten Free 1885
- Increased FY2016 investment and support for Tennent’s and Bulmers brands
- Transformation of business models to brand led wholesaler with further progress planned for FY2016
C&C Brands:
- Repositioning of C&C Brands commenced in 4th quarter
- Cost rationalisation plans announced
- Focus on simplified business model and stabilisation
- Finding a structural solution for the long term remains a priority
North America:
- FY2015 was a year of significant investment for the Group
- New cidery opened in August. Overall support and investment behind brands increased and there was considerable activity in NPD, including the launch of Gumption and Hopsation
- Disruption effect of new entrants eased in the second half of the year
- Assets are well invested and positioned to return to growth in a market anticipated to grow dynamically but with a more stable competitive landscape in FY2016
Export:
- Distributor issues in Australia were resolved in the year
- Excluding Australia, export volume was up 17%
- Exports of Tennent’s brand grew 37% in the year
- Recent development of the cider category in Asia and Europe validates long term potential for cider
- Resource and investment reshaped to enable the Group to better capitalise on the opportunity