TIDMCCR
C&C Group plc
RESULTS FOR THE 12 MONTHSED 28 FEBRUARY 2018
Dublin, London, 16 May 2018: C&C Group plc ('C&C' or the
'Group'), a leading manufacturer, marketer and distributor of
branded cider, beer, wine, soft drinks and bottled water announces
results for the 12 months ended 28 February 2018 ("FY2018").
FY2018 Financial FY2018Pre-exceptionals FY2017Constant Change(i)% FY2017Reported
highlights f/x(i) asrestated(ii) asrestated(ii)
EURm except per
share items
Net revenue 548.2 576.2 (4.9%) 596.5
Adjusted EBITDA(iii) 100.4 107.2 (6.3%) 110.0
Operating profit(iv) 86.1 92.6 (7.0%) 95.0
Operating margin 15.7% 16.1% (40bps) 15.9%
Adjusted diluted 22.0 23.2 (5.2%) 23.8
EPS(v)(cent)
Dividend per 14.58 +1.7% 14.33
share (cent)
Free 70.8 58.3
cash
flow
(excl.exceptionals)(vi)
Free 70.5% 53.0%
cash
flow(vi)/AdjustedEBITDA(iii)
(% conversion)
Net debt(vii) 237.6 170.6
Financial overview
-- Results in line with analyst expectations, despite weather disruption
across the sector.
Strong performance from Tennent's, Magners, premium and
wholesale
businesses in Great Britain (GB).
Competitive pressure in Ireland, one-off AB InBev impacts
and
currency (EUR2.4 million) negatively impacting the Group's
reported
revenue and profit performance in the year.
-- Comparable operating margins decreased 40bps(i) to 15.7%
driven by brand investment and business mix.
-- Strong free cash flow(vi) of EUR70.8 million and cash
conversion 70.5% of Adjusted EBITDA(iii).
-- Exceptional items before tax were EUR7.0 million (FY2017: EUR150.1
million) and the Group's pension schemes returned to a surplus
of EUR1.0
million (FY2017: EUR17.8 million deficit).
-- Strong balance sheet with Net debt(vii)/EBITDA(iii)
at February 2018 of 2.37x, after a year of strategic
investment.
EUR42 million investment in Admiral Taverns and a further
EUR11
million on craft brands.
Returned EUR78 million to shareholders through a combination
of
share buybacks and dividends.
-- Following the acquisition of Matthew Clark the focus will be to
de-lever the Group to the medium term target of 2x Net
Debt(vii)/EBITDA(iii).
-- Final dividend of 9.37c per share, taking total dividend for the year
to 14.58c, an increase of 1.7%.
-- Current trading in line with expectations.
Strategic overview
-- Significantly strengthened route-to-market access across the UK
through Admiral Taverns investment (December 2017) and Matthew
Clark
Bibendum acquisition (April 2018).
-- Good momentum through first year of AB InBev cider distribution
agreement.
-- Strengthened craft portfolio with the acquisition of Orchard Pig cider
in the UK and a further investment in the Five Lamps brewery in
Dublin.
Operational overview
-- Resilient performance across our branded portfolio in GB and Ireland.
Total C&C branded volumes +0.3%; revenues +0.8%(viii)
.
Branded beer portfolio outperforming the market: volumes
+1.3%;
revenues +6.5%.
-- Strong performance in our GB businesses.
Investment behind Tennent's is driving share growth and
revenues
+5%, on flat volumes.
Wholesale is growing customers +2%, volumes +3% and revenues
also
up, wine volumes particularly strong +4%. Share of sales
captured
online 23.9% (FY2017: 14.3%)
Magners +9% in second half (H1'18: -6%) driven by new listings
in
impulse, wholesale and draught channels.
-- Strong organic growth in super-premium and craft with volumes +41%
across our portfolio.
Super-premium and craft portfolio now contributes 108kHL of
volumes, revenues of EUR15.7m and 5,691 off-trade
distribution
points across UK (March 17: 350).
-- In Ireland, the new marketing campaign for Bulmers Original under the
tag-line "100% Irish" increased brand affinity and brand
salience
scores for Bulmers by 8ppts(x).
C&C's share of off-trade cider increased to 57% (February
2017
MAT: 56%)(ix)
Bulmers brand family (including Outcider) share in on-trade
packaged remains robust at 85% (MAT February 2018)(ix),
but Bulmers overall brand volumes were -6%, reflecting
reduced
draught distribution.
Good year in craft and super-premium: Five Lamps doubled
volumes,
launch of Dowd's Lane.
-- Growth in International volumes +2% (ex. US), from increasing
distribution through proven international partners.
In the US, volumes in double-digit decline, but signs of
sector
stabilisation. Resumed full responsibility for our US brands
from
Pabst from 1 April 2018.
-- Admiral Taverns trading in line with expectations.
Comparable EBITDA +0.8% in three months to February 2018;
contributing EUR1.1m of after tax associate income since
acquisition.
Stephen Glancey, C&C Group CEO, commented:
"FY2018 was a significant year of progress for the Group, both
in terms of strategic development as well as improved underlying
performance. While the trading environment in our key markets of
the UK and Ireland remained challenging, our branded portfolio
returned to volume and revenue growth, outperforming the broader
LAD market.
Our Scottish businesses excelled this year, with Tennent's
driving share growth and revenues of +5%, benefiting from continued
investment in social media, sponsorship and new fount roll-out
programme. Our Tennent's wholesale distribution business in
Scotland also performed strongly. Customer numbers, volumes and
revenues were all up, driven by the Group's procurement scale
helping deliver value to customers and excellent service
levels.
The expansion of our distribution agreement with AB InBev for
our cider portfolio in the UK gained momentum, through its first
year. Incremental on-trade and wholesale distribution points for
Magners yielded positive results in H2'18.Our investment in Admiral
Taverns further enhances our route-to-market across the UK. We
completed the investment in December 2017 and trading to date is in
line with our expectations.
In Ireland, Bulmers brand investment helped boost our brand
health scores with our key target demographic of 18-24 year olds as
well as grow share in the off-trade and hold share in packaged
on-trade, but competitive pressures remain in draught(x).
FY2018 saw another year of strong performance for our craft and
super-premium brand portfolio, with Menabrea increasing volumes by
+53% and Heverlee by +35%. We strengthened our portfolio increasing
our investments in the Dublin craft brewery - Five Lamps and the
Somerset craft cider brand - Orchard Pig.
These craft investments, together with Admiral totalled EUR53
million. We also returned EUR78 million to shareholders through a
combination of share buybacks and dividends.
With Net Debt(vii)/EBITDA(iii) of 2.37x at 28 February 2018,
leverage at year end remained low. This enabled us to move quickly
and opportunistically for Matthew Clark Bibendum, which we acquired
post year end out of the administration of Conviviality Plc.
Matthew Clark Bibendum, is the largest independent distributor to
the UK on-trade. With unparalleled on-trade market access, a wide
range of supplier relationships, and supported by a skilled and
loyal employee base, this is a business we know well. A
strategically important acquisition for C&C, this greatly
enhances our route-to-market in the UK on-trade. Significant
progress has already been made in stabilising the business. We look
forward to working with our new colleagues in restoring the Group's
position as one of the leading and most respected drinks suppliers
in the UK hospitality sector.
In terms of outlook, trading in March and April for C&C
Group has been in line with expectations, and we are confident in
our outlook".
Summary notes to highlights pages and Operational Review are set
out below.
(i) FY2017 comparative adjusted for constant currency (FY2017 translated at FY2018 F/X rates) as outlined on page 18.
(ii) In anticipation of the implementation of IFRS 15 Revenue from Contracts with Customers from 1 March 2018, management has examined the accounting for revenue on contract manufacturing activities. Management has determined that income from such arrangements, previously netted from operating costs, should more appropriately be recorded gross, as revenue. Accordingly, management have changed the classification of such income in the Income Statement for the year ended 28 February 2018. In the current year, the amount recorded that would have been netted from operating costs was EUR36.5m and accordingly, in the prior year Income Statement line items have been restated as follows: gross revenue has increased by EUR42.7m, excise duties have increase by EUR5.7m, and net sales revenue and operating costs have increased by EUR37.0m. Further details are provided in Note 13 to these preliminary results. The restatement has no impact on net income or net assets for the prior year.
(iii) Adjusted EBITDA is earnings before exceptional items, finance income, finance expense, tax, depreciation and amortisation charges. A reconciliation of the Group's operating profit to Adjusted EBITDA is set out on page 17.
(iv) Before exceptional items of EUR7.0m on a before tax basis.
(v) Adjusted basic/diluted earnings per share ('EPS') excludes exceptional items. Please also see note 6 of the condensed financial statements.
(vi) Free Cash Flow ('FCF') is a non GAAP measure that comprises cash flow from operating activities net of capital investment cash outflows/(inflows) which form part of investing activities. FCF highlights the underlying cash generating performance of the ongoing business. A reconciliation of FCF to Net Movement in Cash per the Group's Cash Flow Statement is set out on page 17.
(vii) Net debt comprises borrowings (net of issue costs) less cash.
(viii) Includes first year benefit of Orchard Pig acquisition in April 2017, which contributed volumes of 32.7kHL and net revenues of EUR4.1.
(ix) Nielsen Ireland Databases - ROI total cider category volumes as at February 2018.
(x) Company commissioned market research conducted by Ipsos MRBI (2015) and Behaviour & Attitudes in 2017
Conference call details | Analysts & Institutional
Investors
C&C Group plc will host a live conference call and webcast,
for analysts and institutional investors, today, 16 May 2018, at
8.30am BST (3.30am ET). Dial in details are below for the
conference call. The webcast can be accessed on the Group's
website: www.candcgroupplc.ie.
Ireland: + 353 1 431 1252
Europe: + 44 333 300 0804
USA: + 1 631 913 1422
Passcode: 79170102#
For all conference call replay numbers, please contact FTI
Consulting.
About C&C Group plc
C&C Group plc is a premium drinks company which owns,
manufactures, markets and distributes branded beer, cider, wine,
soft drinks and bottled water. C&C Group 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 super-premium and craft ciders and beers.
C&C Group also owns and manufactures Woodchuck, a leading craft
cider brand in the United States and manufactures and distributes a
number of 3rd party international beer brands in Scotland and
Ireland. C&C is also a leading drinks wholesaler in the UK and
Ireland, where it operates under the Matthew Clark, Bibendum,
Tennent's and C&C Gleeson brands. C&C Group has a minority
investment in the Admiral Taverns tenanted pub group, which owns
over 850 pubs across England & Wales. C&C Group is
headquartered in Dublin with manufacturing operations in
Co.Tipperary, Ireland; Glasgow, Scotland; and Vermont, US. C&C
Group plc is listed on the Irish and London Stock Exchanges.
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 20 that
could cause actual results to differ materially from those
anticipated.
Contacts
C&C Group plcStephen Glancey | Group Chief ExecutiveJonathan
Solesbury | Chief Financial OfficerJoe Thompson | Head of Investor
RelationsTel: +44 7980 844 580Email: Joe.Thompson@candcgroup.comFTI
ConsultingMark KennyJonathan NeilanTel: +353 1 663 3686Email:
CandCGroup@fticonsulting.comNovella CommunicationsTim RobertsonToby
AndrewsTel: +44 203 151 7008Email: TimR@novella-comms.com
OPERATING REVIEW
Great Britain
EURm Great Britain
Constantcurrency(i) FY2018 FY2017 Change %
Scotland C&CBrands GB Scotland C&CBrands GB Scotland C&CBrands GB
Revenue 307.5 152.3 459.8 294.9 145.8 440.7 +4.3% +4.5% +4.3%
Net Revenue 211.5 81.2 292.7 201.7 84.6 286.3 +4.9% (4.0%) +2.2%
- Price / mix +6.0% (2.6%) +3.5%
impact
- Volume (1.1%) (1.4%) (1.3%)
impact
Operating 32.6 6.9 39.5 31.0 7.0 38.0 +5.2% (1.4%) +3.9%
profit(ii)
Operating 15.4% 8.5% 13.5% 15.4% 8.3% 13.3% 0bps +20bps +20bps
margin
Volume - (kHL) 1,378 1,198 2,576 1,394 1,216 2,610 (1.1%) (1.5%) (1.3%)
- of which 1,017 1,019 (0.2%)
Tennent's
- of which 520 518 +0.4%
Magners
Market insight
UK economic growth slowed during the calendar year 2017, as
rising inflation and negative real wage growth dampened consumer
spending and impacted broad swathes of the consumer and retail
sectors. LAD markets demonstrated their resilience with volumes
flat for GB cider and -1% for lager, but value up 2-3% across each
category as firmer pricing and premiumisation trends continued
across the sector(iii).
Within this, premium and speciality categories outperformed
standard and the off-trade outperformed the on-trade(iii).
Off-trade volumes were broadly flat, but on-trade was negative(iii)
driven by adverse weather and the growth seen in previous periods,
particularly in city centre and food-led pubs, reversing.
In Scotland, the final legal challenges against the introduction
of minimum unit pricing legislation were dismissed in November 2017
and the Scottish Government enacted the legislation for 1st May
2018 implementation. C&C has been supportive of this
legislation since inception and believes it is an important step in
tackling the social and human cost of problem drinking,
particularly amongst Scotland's poorest and most vulnerable
communities.
In the UK, the cider category remains competitive. However, some
rationalisation is occurring within the category as major
international brewing groups switch their focus from developing
their own cider brands towards greater collaboration with
established players.
Operational performance
Tennent's
The Tennent's brand has had a very strong year, benefitting from
continued investment in social media, product innovation,
sponsorship and new fount roll-out programme. Brand volumes were
flat, outperforming a total beer market that was down -2%(iii)
despite several periods of highly disruptive winter weather. In the
important independent free trade in Scotland we grew customers,
share and value. Off-trade volumes were up +3% again taking share.
Brand investment and innovation in pack design also helped drive a
strong net sales rate performance, reflecting premiumisation and a
marked price/mix improvement. Accordingly, net sales revenues for
the Tennent's brand for the period were up 5.3% in GB(iii).
We completed the roll-out of over 5,000 new Tennent's founts
across the Scottish on-trade. The new founting produced increased
rate of sale in a sample of participating stockists of 2.8%(iv) and
helped drive outperformance against peers and the market. Our
social media activity in Tennent's continues to win both share of
mind with Scottish consumers and industry awards. Tennent's
retained its No.1 ranking in Scotland in the YouGov purchase intent
index, improving 2.1 points over 2017(v).
Wholesale distribution
Operational and financial performance at our Tennent's wholesale
distribution business in Scotland strengthened throughout the year.
Customer numbers are up +2% year-on-year, together with some larger
account wins. Volumes were up 3.0% for the year (H1'18: +1%), with
revenues ahead by more, reflecting improved mix and price inflation
across third party brands. Success has been driven by leveraging
the Group's procurement scale to deliver value to customers,
excellence in service levels, including a streamlined ordering
process with on-line ordering now accounting for 24% of volumes
(FY2017: 14%).
This positive performance includes another strong year from our
specialist wine business in Scotland which was up +4% in the year,
led by our on-trade, own label business.
Magners and UK cider portfolio
In April 2017, Magners and our portfolio of English cider brands
transitioned to new distribution arrangements with AB InBev. After
a slow start, Magners volumes have gathered momentum through the
second half +9% (H1'18: -6%). Overall Magners volumes are flat for
FY2018, a good performance in a year of transition and against some
very strong comparatives (FY2017: +12.8%).
It is still early days but there is already clear evidence of
the long-term opportunity for our brands under this new
distribution partnership. Magners SKUs performed well in range
reviews in the year with the major supermarket groups. Moreover,
new distribution listings have been achieved in the convenience
channel (Magners is +12% in Nielsen MATs to February 18 for
Impulse), amongst wholesalers and in draught (Magners Original
draught volumes are +20% year-on-year).
Craft and super-premium
Our craft and super-premium brands had another strong year of
both organic and acquisitive growth in Scotland and across the rest
of Great Britain. We launched Heverlee, our Belgian lager, in the
Scottish off-trade in August in 660ml bottle and 330ml can. The
brand was the fastest growing new launch in Tesco in that period
and distribution has already been extended to the rest of the UK.
The success demonstrates the value of the C&C model where our
core brand strength and distribution network enables us to build
brand momentum in the on-trade, before launching successfully into
the off-trade.
Menabrea increased volumes by +55% to 18kHL in GB, achieving
good growth across national on and off-trade accounts, casual
dining as well as the Scottish IFT. Heverlee was +33% and Drygate
our Scottish craft joint venture, was +74%. Off-trade distribution
across the UK has increased dramatically with four of our
super-premium brands (Heverlee, Menabrea, Pabst and Caledonia Ales)
now securing 5,691 off-trade distribution points between them, up
from just 350 in March 2017.
We strengthened our craft portfolio in the period completing the
purchase of Orchard Pig in April 2017, having originally invested
in the business in 2012. Orchard Pig is a fast-growing craft cider
brand based in Somerset which has built a strong consumer franchise
and an impressive distribution footprint across the on and
off-trade, particularly in London and the Southeast of England.
Orchard Pig contributed 33kHL in the 10 months to February 2018 and
grew comparable volumes at +41% over the last 12 months. The
brand's super-premium and craft credentials complement C&C
Group's existing international and regional cider brand portfolio.
From March 2018, we brought Orchard Pig within our distribution
agreement for UK cider with AB InBev to further enhance its
footprint.
Admiral Taverns
On 4th September 2017, we announced a joint venture investment
in Admiral Taverns, an award-winning leading tenanted pub company,
with c. 850 pubs across England and Wales. The investment was GBP37
million (EUR42 million) for a 47% equity stake in the business in
partnership with a private equity firm Proprium Capital and Admiral
management. The investment completed on 6 December 2017,
simultaneously with an acquisition by Admiral Taverns of a further
17 pubs from Heineken's Star Pubs & Bars Division.
Against a backdrop of an increasingly challenging market and
softening consumer confidence trading at Admiral's predominantly
wet-led pubs has been resilient and in line with plan. Comparable
EBITDA(x) for the three months to February 2018 is up 0.8%.
EBITDA(x) for the 12 months ended 28 February 2018 was GBP23.7m
(February 2017: GBP24.4m), including the known impact of a new
distribution agreement with KNDL signed in 2017. Admiral is
accounted for as an associate of C&C and it contributed EUR1.1m
of after tax associate income to the Group profits in the three
months from completion to end February 2018.
We are working closely with the management team at Admiral to
identify appropriate opportunities for our brands.
Financial performance
The strong divisional revenue and profit uplift were driven by
our Scottish business, in particular the improvement in Tennent's
rate, a positive volume and price/mix in wholesale and continued
high growth and margins at our craft and super-premium
portfolio.
Our total branded volumes in Great Britain were up 1.9%,
including the part-period contribution from Orchard Pig, a strong
organic performance from our super-premium and craft portfolio and
stable volumes at our core UK brands of Magners and Tennent's.
Margins at our Scottish businesses remained broadly flat given
increased investment in Tennent's founts and investment in price
within our wholesale business.
The volume and revenue performance in our Great Britain division
was also impacted in the year by the withdrawal from certain
own-label contracts following the sale of Shepton in 2016 and a
weaker performance by AB InBev beer brands. Own label and AB InBev
beer volumes and revenues were down in aggregate 72kHL of volume;
GBP5.6m (EUR6.3m) of net revenue in the period.
Ireland
EURm Ireland
Constant currency(i) FY2018 FY2017 Change FY2017
Underlying* % CC(i)
Revenue 312.1 326.6 (4.4%) 341.5
Net revenue 215.0 227.6 (5.5%) 242.5
- Price / mix impact +0.3%
- Volume impact (5.8%)
Operating profit(ii) 40.1 43.0 (6.7%) 48.0
Operating margin (Net revenue) 18.7% 18.9% (20bps) 19.8%
Total volume - (kHL) 1,324 1,405 (5.8%) 1,599
- of which Bulmers - (kHL) 386 409 (5.6%) 409
* Underlying FY17 comparatives adjusted for: (i) constant
currency(i) (FY2017: revenues EUR3.5 million, net revenues EUR2.9
million; operating profit EUR0.7 million); (ii) the impact of
certain AB InBev beer volumes in Ireland in the comparative period
which transferred to direct supply under the terms of our revised
distribution arrangements with AB InBev (FY17: volumes
194kHl;revenues EUR14.9 million; net revenues EUR14.9 million;
operating profit EUR5.0 million).
Market insight
Macro-economic indicators continued to strengthen through the
year in the Republic of Ireland, despite the uncertainty
surrounding Brexit. However, economic expansion remains
concentrated in the major urban areas, with consumer spending in
rural areas more subdued. Against strong comparatives buoyed by the
European Championships and better weather, the LAD market was down
-1.2%(iii) (MAT at February 2018), with cider faring slightly
better at -0.5%(iii). These weaker volumes were most keenly felt in
the on-trade, with the both LAD and cider categories down
c.-3%(iii), in part due to increased competition from other drinks
categories, particularly premium spirits. On-trade LAD volume
declines were mitigated by growth in off-trade and a firmer pricing
environment.
In Northern Ireland, the squeeze on consumer spending from
falling real wage growth was felt across the hospitality industry,
with on-trade LAD volumes down significantly year-on-year(iii).
The competitive landscape across the Island of Ireland remains
intense with significant new product launches by major
international brewers across beer and cider, heightening
competition for bar space and consumer attention.
Operating performance
Cider - ROI
During the year we significantly increased our investment behind
the Bulmers brand. This included the launch of Outcider by Bulmers,
and a new marketing campaign for Bulmers Original under the
tag-line "100% Irish". Both have been well received by Irish
consumers and customers. Brand affinity and brand salience scores
for Bulmers increased with our key target demographic of 18-24 year
olds by 8ppts on each measure, to 40% and 54%(vi), respectively.
Prompted awareness is now 98% (vi). Outcider has taken a 2% share
of cider in the off-trade in its first 12 months(iii).
C&C grew its share of off-trade cider to 57% MAT February
2018 (February 2017: 56% MAT)(iii). Within this, Bulmers family
(including Outcider) held its share of off-trade at 47%(iii). The
off-trade channel accounts for 61% of cider volumes in the Republic
of Ireland and 35% by value(iii).
In the on-trade Bulmers still enjoys a significant distribution
and rate of sale advantage over all competitors. Bulmers on-trade
market share(iii) in packaged remains solid at 85% MAT February
2018 (February 2017: 88%)(iii), while share in draught softened as
a result of reduced distribution to 69% MAT February 2018 (February
2017: 77%)(iii). On-trade packaged accounts for 28% of cider
volumes and 47% by value(iii). On-trade draught 11% of volumes and
17% by value(iii).
Overall, on and off-trade volumes for the Bulmers brand family
were 6% down on last year, but should be considered against a
strong brand performance in the comparative period +3% and the
reduction in the on-trade cider category of -3%(iii).
We invested an additional EUR3 million in ATL activity on the
Bulmers brand in the year. The marketing focus will now progress
onto more in-pub activation and a further refinement of the pint
bottle livery to enhance standout. In addition, we improved our
trading strategies in the on-trade, creating a focussed key brands
sales team for the Dublin area and targeting marquee lost
accounts.
Craft and super-premium
Our craft and super-premium portfolio had another good year in
Ireland. We increased our financial investment in the Five Lamps
brewery in Dublin. The brand is now in 303 pubs across Ireland
(+86% year-on-year), with a further 250 installs targeted for
FY2019. To complement the Five Lamps range of craft lagers we
launched our Dowd's Lane range of traditional craft Ales, Stouts
and Cider. The combined Five Lamps/Dowd's Lane business is among
the largest craft businesses in Ireland. Heverlee, our premium
Belgian lager, had another strong performance with volumes +17.7%
including the successful launch of a 660ml bottle for the
off-trade.
Tennent's NI
Despite particularly poor summer weather, and a more challenging
consumer backdrop, our core Northern Irish business performed
satisfactorily with volumes and revenues ahead of last year and
outperforming the broader LAD market.
Wholesale
The performance of our C&C Gleeson wholesaling business
improved through the year, with a strengthened management team
leveraging off the procurement synergies of the C&C Group, for
the ultimate benefit of customers. Volume losses in the first half
moderated to a flat year-on-year performance in Q4. Our wine
business, was up 3% in the year at over 80kHL, benefitting from our
distribution rights in Ireland for Blossom Hill, Santa Rita and
Castella.
Financial performance
The financial performance of the Ireland division was
principally impacted by the revised terms of our distribution
agreement with AB InBev for their beer portfolio in Ireland, as
well as reduced volume and margin performance in Bulmers.
As anticipated, the new distribution terms on AB InBev beer
resulted in the loss of a number of wholesaler accounts in Ireland
which reverted to direct supply. These accounts had contributed
volumes, revenues and profits of 194kHL, EUR14.9 million and EUR5.0
million respectively in the prior period and therefore accounts for
a significant part of the division's reported volume, revenue and
operating profit declines in the period.
On an underlying basis the performance of the division was
primarily impacted by Bulmers, where the volume decline of 6%
resulted in reduced revenues and profits, with rate and margin also
softening as a result of adverse channel mix. In addition, there
were negative performances in our lower margin own label and
Gleeson's drinks distribution businesses. Divisional margins were
down 20bps at 18.7% on an underlying basis (down 110bps on a
constant currency reported basis) due to increased brand investment
in and negative channel mix impact in Bulmers, mitigated by
overhead cost reductions and improved business mix away from own
label and third party distribution.
While the timing of Christmas provided a modest boost to the
trade, several days trading were lost in the second half due to
disruptive winter weather.
International
EURm International
Constantcurrency(i) FY2018 FY2017 Change %
Export NorthAmerica Int'l Export NorthAmerica Int'l Export NorthAmerica Int'l
Revenue 22.0 19.6 41.6 23.6 25.3 48.9 (6.8%) (22.5%) (14.9%)
Net Revenue 21.9 18.6 40.5 23.5 23.9 47.4 (6.8%) (22.2%) (14.6%)
- Price / mix (9.0%) (2.8%) (3.5%)
impact
- Volume +2.2% (25.0%) (11.1%)
impact
Operating 5.1 1.4 6.5 5.9 0.7 6.6 (13.6%) +100.0% (1.5%)
profit(ii)
Operating 23.3% 7.5% 16.0% 25.1% 2.9% 13.9% (180bps) +460bps +210bps
margin
Volume - (kHL) 189 132 321 185 176 361 +2.2% (25.0%) (11.1%)
Our International division now comprises all export markets for
C&C outside of the UK and Ireland. Our strategy is to
capitalise on the global growth trajectory of cider and premium
beer with our portfolio of authentic British and Irish brands
through partnership arrangements with local and international
brewers and distributors.
Market insight(viii)
The cider category (ex.UK and Ireland) continues to expand at an
estimated 3%(xiii) per annum. The category is growing faster than
beer, driven by both the recruitment of new drinkers in established
cider countries as well as the steady evolution of new cider
markets. Consumers across the globe are attracted by cider's
sweeter proposition, its refreshing taste and natural, gluten-free
and female-friendly credentials. In Europe, cider is building on
its established position in Western Europe and by increasing its
share of LAD in the more traditional beer markets of Central and
Eastern Europe. Asian cider markets continued to develop quickly,
albeit from a low base led by China, Hong Kong, Singapore and
Taiwan.
After the period of rapid expansion in 2012-2015(vii), the US
cider market continues to experience significant volume declines.
Consumer interest has switched to adjacent categories and cider has
lost both shelf space with retailers and brand investment from the
major brewers. However, signs of stabilisation are emerging across
the category with import brands and fruit ciders returning to
modest growth, but big national brands are continuing to cede share
to local and craft producers. Accordingly, volumes for the cider
category as a whole are running at mid-single digit declines.
Operating performance
Export markets
In line with our strategy to consolidate and enhance our
international distributor network, we made good progress in the
year transitioning our brands in certain key target markets to
higher quality and proven international partners. AB InBev are now
distributing Tennent's for us in Italy and trialling distribution
of Magners in China; Coca Cola Amatil have had a good first year as
our Magners distributor in Australia (volumes +32%), having
performed strongly for us in recent years in New Zealand. In
addition, significant growth (+35%) was achieved in Germany where
Karlsberg (our successful partner in France) took over the
distributorship this year.
In aggregate, European volumes of 143kHl in the year were up 3%
year-on-year (FY2017: +14%). We saw good growth in Germany due to
an expanding category and a change of distributor. Elsewhere,
performance was more subdued against strong comparatives,
particularly in France which hosted the European Championships in
FY2017. In addition, margins and volumes were under pressure in
certain European markets such as Portugal and Spain as the
devaluation of sterling has led to an increase in parallel imports
of Magners from the UK. This is likely to remain a feature of our
business in the near term and we have adjusted pricing accordingly,
which will negatively impact on revenues and margins in FY2019.
Our nascent African business (FY2017: 12.5kHL) suffered
significant supply chain disruptions, with only 4.1kHL shipped in
FY2018. Shipments have recommenced in April 2018.
In Asia Pacific our brands performed strongly in the period with
volumes up 24% to 40kHl. This was a result of a good recovery in
Magners in Australia under our new distributor, as well as good
progress in a number of other markets across beer and cider
including China, New Zealand and South Korea. This positive
performance outweighed the impact of discontinued business in India
(FY2017: 4.8kHL).
Core brand export performance: Magners and Tennent's
Magners volumes were flat at 100kHL in our Export markets as
strong growth in Australia and New Zealand was held back by a more
muted performance in Europe and travel retail. We launched Magners
Juicy Apple in the year across our Asian markets. This slightly
sweeter product extension will help expand the brand's appeal with
younger, local consumers.
The Tennent's brand continues to make good progress in
international markets. We now export to 35 countries globally and
volumes were 52kHl in the year. Despite the impact of discontinued
low-value business, volumes were up +2%. Growth came predominantly
from Asia, with encouraging contributions from China and South
Korea.
Our Export markets (excluding North America) grew volumes in
aggregate for the year by +2%. However, excluding
discontinued/suspended activity in India and Africa these markets
were in growth by 10%, in line with our long term growth targets
for this part of the business.
North America
In the US our cider brands continued to be negatively impacted
by declines in the overall cider market. Our branded portfolio was
down 25%, due primarily to the poor performance of our national
cider brands Woodchuck and Gumption. However, volumes of Magners
and our other English cider brands stabilised during the year.
Together with Wyders, our US fruit-styled cider brand, these import
brands now account for 50% of our branded portfolio in the US and
have returned to modest growth.
In February 2018, we announced that we were resuming full
responsibility for the sales and marketing of our brands in the US
and terminating our distribution arrangements with Pabst Brewing
Company. The transfer was effective 1st April 2018, with all
transferees and new hires now in post. Current trading is ahead of
plan. Our sales and marketing strategy going forward will be more
focussed around the key markets for our US and import brands.
Financial performance
Operating profits for the International division were broadly
flat on prior year at EUR6.5m, despite upfront investment from
entering and developing new markets and slower growth in high
margin European markets. Continued volume and revenue declines in
our US brands, have been mitigated by further cost efficiencies and
contract manufacturing and packaging wins. NSV rate/HL in other
export markets declined due to country and brand mix, as developing
markets in Asia grew volumes more strongly than higher value
markets in Europe. This also impacted on margin in Export, despite
some marketing and overhead savings.
Update on Matthew Clark Bibendum acquisition
On 4 April 2018, we announced the acquisition of Matthew Clark
Bibendum (MCB) for nominal consideration out of the administration
of certain subsidiaries of Conviviality Group Plc. While still
operational, the business had clearly been operating under
financial stress for some weeks and stock and service levels were
significantly below normal. Since that time, through the incredible
hard work of all MCB and selected senior C&C staff and the
significant support of its customers and suppliers, we have made
great strides in getting this high quality business back on its
feet.
There is still much more work to do, but stock levels are now
returning to normalised levels. The support we have received from
all stakeholders demonstrates the unique and valued position this
business occupies within the UK hospitality sector.
We are pleased to announce the appointment of David Philips as
Managing Director of Matthew Clark. David was Finance Director of
Matthew Clark between April 2007 and November 2015 and brings a
wealth of knowledge and experience which will be invaluable in
re-establishing a robust control environment and moving the
business forward to best meet suppliers and customer
expectations.
Our initial review of the opening working capital balances as at
4th April 2018, show stock of GBP56.3m; trade and other receivables
of GBP184.9m (of which trade receivables (including retros) were
GBP163.8m); and trade and other payables were GBP247.1m (of which
trade creditors (including goods received not invoiced) were
GBP166.3m and excise duty, VAT and other taxes were GBP51.5m).
These balances remain subject to audit and final fair value review.
We expect to give a more detailed update on the current trading and
prospects of the Matthew Clark business in our half-year pre-close
trading update in September 2018.
FINANCE REVIEW
Year Year ended28 CC(i)28 Change% CC(i)Change%
ended28 February2018EURm February2017 February2017asrestatedEURm
asrestatedEURm
Net revenue 548.2 596.5 576.2 (8.1%) (4.9%)
Operating profit(ii) 86.1 95.0 92.6 (9.4%) (7.0%)
Net finance costs (8.1) (7.8)
Share of equity 1.2 -
accounted
investments'profit
after tax
Profit before tax 79.2 87.2
Income (11.3) (13.0)
tax expense(ii)
Effective tax rate* 14.3% 14.9%
Profit for the year 67.9 74.2
attributable
to
equityshareholders(ii)
Adjusted diluted 22.0 cent 23.8 cent (7.6%)
EPS(viii)
Dividend per Share 14.58 cent 14.33 cent +1.7%
Dividend payout ratio 66.3% 60.2%
* The effective tax rate is calculated based on profit before
tax excluding exceptional items.
C&C is reporting net revenueof EUR548.2 million, operating
profit(ii) of EUR86.1 million and adjusted diluted EPS(viii) of
22.0 cent and FCF(xi) of 70.5%. On a constant currency(i) basis net
revenue decreased 4.9% and operating profit(ii) decreased 7.0%.
FINANCE COSTS, INCOME TAX AND SHAREHOLDER RETURNS
Net finance cost was EUR8.1 million for the year (FY2017: EUR7.8
million), increase on prior year due to the higher utilisation of
the banking facilities. Net finance costs also included the
unwinding of a discount on provisions charge of EUR0.3 million
(FY2017: EUR0.8 million).
The income tax charge in the year was EUR11.3 million. This
excludes the credit in relation to exceptional items and represents
an effective tax rate of 14.3%, representing a decrease of 0.6
percentage points on the prior year. The Group is established in
Ireland and as a result it benefits from the 12.5% tax rate on
profits generated in Ireland. The effective tax rate is higher than
the standard corporate tax rate of 12.5% for the Group as a result
of a higher proportion of profits subject to taxation coming from
outside of Ireland.
Subject to shareholder approval, the proposed final dividend of
9.37 cent per share will be paid on 13 July 2018 to ordinary
shareholders registered at the close of business on 25 May 2018.
The Group's full year dividend will therefore amount to 14.58 cent
per share, a 1.7% increase on the previous year. The proposed full
year dividend per share will represent a pay-out of 66.3% (FY2017:
60.2%) of the full year reported adjusted diluted earnings per
share(viii). This increase in both the dividend per share and
payout ratio reflects our confidence in the cash generation
capability of the business and the underlying stability of core
earnings.
A scrip dividend alternative will be available. Total dividends
paid to ordinary shareholders in FY2018 amounted to EUR45.0
million, of which EUR40.6 million was paid in cash and EUR4.4
million or 9.8% (FY2017: 18.8%) was settled by the issue of new
shares.
In addition to increased dividends, we invested EUR33.1 million
(including commission and related costs) in market share buybacks,
purchasing 9.49 million of our own shares at an average price of
EUR3.44. Our stockbrokers, Investec and Davy, conducted the share
buyback programme. All shares acquired during the current financial
year were subsequently cancelled.
EXCEPTIONAL ITEMS
Costs of EUR7.0 million on a before tax basis were charged in
FY2018 which, due to their nature and materiality, were classified
as exceptional items for reporting purposes. In the opinion of the
Board, this presentation provides a more useful analysis of the
underlying performance of the Group.
The main items which were classified as exceptional
include:-
(a) Restructuring costs
Restructuring costs of EUR1.9m were incurred in the current
financial year (2017: EUR12.7m) primarily relating to severance
costs of EUR1.5m arising from the change in the distribution
arrangements with AB InBev in England and Wales, as well as other
restructuring initiatives in our strategy and export divisions
within the Group. Other costs of EUR0.4m primarily relate to the
closure of a warehousing facility.
(b) Revaluation/impairment of property, plant &
equipment
In the current financial year, as part of our accounting policy
where we externally revalue fixed assets on a triennial basis, we
engaged external valuation experts to value the land and buildings
and plant and machinery at the Group's Clonmel (Tipperary) and
Wellpark (Glasgow) sites, along with depots in Dublin, Cork and
Galway. Using the valuation methodologies, this resulted, in a net
revaluation loss of EUR5.0 million accounted for in the Income
Statement and a gain of EUR3.4 million accounted for within Other
Comprehensive Income.
(c) Acquisition related expenditure
In the current financial year the Group incurred professional
fees of EUR0.1 million (2017: EUR0.9 million) associated with the
assessment and consideration of strategic opportunities by the
Group during the year.
BALANCE SHEET STRENGTH, DEBT MANAGEMENT AND CASHFLOW
GENERATION
Balance sheet strength provides the Group with the financial
flexibility to pursue its strategic objectives. It is our policy to
ensure that a medium/long-term debt funding structure is in place
to provide us with the financial capacity to promote the future
development of the business and to achieve its strategic
objectives.
The Group has a EUR450 million multi-currency five year
syndicated revolving loan facility. The facility agreement provides
for a further EUR100 million in the form of an uncommitted
accordion facility and permits the Group to have additional
indebtedness to a maximum of EUR150 million, giving the Group debt
capacity of EUR700 million. The debt facility matures on 22
December 2019. The Group is currently in the process of conducting
an exercise to renew the existing facility in advance of this
date.
At 28 February 2018 net debt(ix) was EUR237.6 million,
representing a net debt(ix):EBITDA(x) ratio of 2.37:1, well within
our bank covenants of 3.5:1.
CASH GENERATION
Management reviews the Group's cash generating performance by
measuring the conversion of EBITDA(x) to Free Cash Flow(xi) as we
consider that this metric best highlights the underlying cash
generating performance of the continuing business.
The Group's performance during the year resulted in an adjusted
EBITDA(x) to Free Cash Flow(xi) conversion ratio pre-exceptional
costs of 70.5%. A reconciliation of adjusted EBITDA(x) to operating
profit/(loss)(ii) is set out below.
RECONCILIATION OF EBITDA(X)TO OPERATING 2018 2017
PROFIT/(LOSS)(II)
EURm EURm
Operating profit/(loss) 79.1 (55.1)
Exceptional items 7.0 150.1
Operating profit before exceptional items 86.1 95.0
Amortisation and depreciation charge 14.3 15.0
Adjusted EBITDA(x) 100.4 110.0
CASH FLOW SUMMARY 2018 2017
EURm EURm
Adjusted EBITDA(x) 100.4 110.0
Working capital (8.3) 0.6
Advances to customers 0.6 (12.4)
Net finance costs (6.4) (6.5)
Tax paid (5.9) (6.9)
Pension contributions paid (1.2) (3.4)
Capital expenditure (14.0) (22.7)
Disposal proceeds property, plant & equipment 3.7 6.9
Exceptional disposal proceeds - 18.7
property, plant & equipment
Exceptional items paid (4.8) (22.7)
Other* 1.9 (7.3)
Free cash flow(xi) 66.0 54.3
Free cash flow conversion ratio 65.7% 49.4%
Free cash flow(xi) 66.0 54.3
- Exceptional cash outflow 4.8 22.7
- Exceptional cash inflows - (18.7)
- Exceptional cash net outflow 4.8 4.0
- Free cash flow excluding exceptional cash outflow 70.8 58.3
- Free cash flow conversion ratio excluding 70.5% 53.0%
exceptional cash outflow
Reconciliation to Group Condensed
Cash Flow Statement
Free cash flow(xi) 66.0 54.3
Net proceeds from exercise of share 2.0 0.8
options/equity Interests
Shares purchased under share buyback programme (33.1) (23.2)
Drawdown of debt 86.8 138.7
Repayment of debt (61.2) (134.0)
Acquisition of business (10.3) -
Net cash outflows re acquisition (44.2) (1.5)
of equity accounted investments
Dividends paid (40.6) (34.9)
Net increase in cash (34.6) 0.2
*Other relates to share options add back, pensions credited to
operating profit, net profit on disposal of property, plant &
equipment.
FOREIGN CURRENCY AND COMPARATIVE REPORTING
2018 2017
Translation exposure Euro: Sterling (GBP) GBP0.881 GBP0.834
Euro: US Dollars ($) $1.157 $1.101
As shown above, the average rate for the translation of results
from sterling currency operations was EUR1:GBP0.881 (year ended 28
February 2017: EUR1:GBP0.834) and from US Dollar operations was
EUR1:$1.157 (year ended 28 February 2017: EUR1:$1.101). 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 and US dollar
denominated subsidiaries by restating the prior year at current
year average rates.
Year ended FX FX Year ended
28 February 2017 transaction translation 28 February 2017adjusted comparative
As restated As restated
EURm EURm EURm EURm
Revenue
Ireland 345.0 - (3.5) 341.5
Great Britain 465.4 - (24.7) 440.7
- Previously Scotland 311.4 - (16.5) 294.9
- Previously C&C Brands 154.0 - (8.2) 145.8
International 50.4 (0.2) (1.3) 48.9
- Previously North America 26.6 - (1.3) 25.3
- Previously Export 23.8 (0.2) - 23.6
Total 860.8 (0.2) (29.5) 831.1
Net revenue
Ireland 245.4 - (2.9) 242.5
Great Britain 302.3 - (16.0) 286.3
- Previously Scotland 213.0 - (11.3) 201.7
- Previously C&C Brands 89.3 - (4.7) 84.6
International 48.8 (0.2) (1.2) 47.4
- Previously North America 25.1 - (1.2) 23.9
- Previously Export 23.7 (0.2) - 23.5
Total 596.5 (0.2) (20.1) 576.2
Operating profit(iii)
Ireland 48.6 0.1 (0.7) 48.0
Great Britain 39.9 0.2 (2.1) 38.0
- Previously Scotland 32.6 0.1 (1.7) 31.0
- Previously C&C Brands 7.3 0.1 (0.4) 7.0
International 6.5 0.1 - 6.6
- Previously North America 0.7 - - 0.7
- Previously Export 5.8 0.1 - 5.9
Total 95.0 0.4 (2.8) 92.6
NOTES TO FINANCE REVIEW
(i) FY2017 comparative adjusted for constant
currency (FY2017 translated
at FY2018 F/X rates) as outlined on page 18.
(ii) Before exceptional items of EUR7.0m on a before tax basis.
(iii) Nielsen Ireland Databases - February 2018; GB on-trade CGA; GB
off-trade Neilsen Scantrack 52wks to end February 2018.
(iv) Based RoS performance (in 2 months post-installation) of
all stocklists receiving new fonts by 10thJune 2017.
(v) YouGov BrandIndex - Purchase Intent scores FY2017 (Scotland).
(vi) Company commissioned market research conducted by Ipsos
MRBI (2015) and Behaviour & Attitudes in 2017.
(vii) TTB Industry Cider Domestic & Import Volumes - May 2017.
(viii) Adjusted basic/diluted earnings per share
('EPS') excludes exceptional
items. Please also see note 6 of the
condensed financial statements.
(ix) Net debt comprises borrowings (net of issue costs) less cash.
(x) Adjusted EBITDA is earnings before exceptional items, finance
income, finance expense, tax, depreciation and amortisation
charges. A reconciliation of the Group's operating
profit to Adjusted EBITDA is set out on page 17.
(xi) Free Cash Flow ('FCF') is a non GAAP measure that
comprises cash flow from operating activities
net of capital investment cash outflows/(inflows)
which form part of investing activities. FCF
highlights the underlying cash generating performance
of the ongoing business. A reconciliation
of FCF to Net Movement in Cash per the Group's
Cash Flow Statement is set out on page17.
(xii) Net debt comprises borrowings (net of issue costs) less cash.
(xiii) Per IRI-Canadean.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors consider that the principal risks and
uncertainties which could have a material impact on the Group's
performance over the remainder of the year remain substantially the
same as those stated on pages 19 to 21 of the Group's annual
financial statements for the year ended 28 February 2017, which are
available on our website, http://www.candcgroupplc.com.
The UK vote to leave the European Union continues to create
significant uncertainty about the near term outlook and prospects
for the UK, Irish and European Union economies and, while the
economic effect of the UK leaving the European Union is uncertain,
it could have the effect of negatively impacting the UK, Irish and
European Union economies and currencies and the financial
performance of the Group, reducing demand in the Group's markets
and increasing business costs including through the application of
additional tariffs and transaction taxes on the Group's products
and raw materials. While recent developments in relation to the
transition period have brought greater clarity for that period and
there have potentially been positive developments in relation to a
free trade agreement after that period, were WTO tariffs to be
applied to our exports from Ireland to the UK or were there to be a
hard border in relation to the movement of people and goods within
the Island of Ireland, it would negatively impact the Group. With
our reporting currency as the Euro, the Group is also exposed to
the translation impact of a weaker sterling.
The Board and management continue to consider the impact on the
Group's businesses, monitor developments and play a role in
influencing the UK, Irish and Scottish Governments to help ensure a
manageable outcome for our businesses. On an ongoing basis, we
seek, where appropriate, to mitigate currency risk through hedging
and structured financial contracts and take appropriate action to
help mitigate the consequences of any decline in demand in our
markets. Our having manufacturing capability in Scotland may also
provide opportunities for the Group arising from Brexit.
On 4 April 2018, we acquired the Matthew Clark and Bibendum
wholesale businesses out of the administration of certain
subsidiaries of Conviviality Group Plc. While the businesses
present significant strategic opportunities for the Group, there is
potential supplier and customer risk while we stabilise the
businesses. There is also a risk that the expected benefits,
synergies and opportunities will not materialise and that the
businesses may present new management and compliance risks.
CONSOLIDATED CONDENSED INCOME STATEMENTFOR THE YEARED 28
FEBRUARY 2018
Year ended 28 February 2018 Year ended 28 February 2017
Beforeexceptionalitems Exceptionalitems (note 6) Total Beforeexceptionaitemsas Exceptionalitems(note 6) Totalas restated
restated
Notes EURm EURm EURm EURm EURm EURm
Revenue 4 813.5 - 813.5 860.8 - 860.8
Excise duties (265.3) - (265.3) (264.3) - (264.3)
Net revenue 4 548.2 - 548.2 596.5 - 596.5
Operating costs (462.1) (7.0) (469.1) (501.5) (150.1) (651.6)
Group operating 4 86.1 (7.0) 79.1 95.0 (150.1) (55.1)
profit/(loss)
Finance income 0.1 - 0.1 0.1 - 0.1
Finance expense (8.2) - (8.2) (7.9) - (7.9)
Share of equity 1.2 - 1.2 - - -
accounted
investments'profit
after tax
Profit/(loss) before tax 79.2 (7.0) 72.2 87.2 (150.1) (62.9)
Income (11.3) 5.4 (5.9) (13.0) 3.0 (10.0)
tax (expense)/credit
Group profit/(loss) for 67.9 (1.6) 66.3 74.2 (147.1) (72.9)
the financialyear
attributable
to equityshareholders
Basic earnings per 8 21.5 (23.5)
share (cent)
Diluted earnings 8 21.5 (23.5)
per share (cent)
All of the results are related to continuing operations.
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOMEFOR THE
YEARED 28 FEBRUARY 2018
2018 2017
Notes EURm EURm
Other Comprehensive Income:
Items that may be reclassified to Income (17.7) (17.8)
Statement in subsequent years:
Foreign currency translation differences arising
on the net investment in foreign operations
Reversal of previously recognised - (2.1)
gain on revaluation
of property, plant and equipment
Gain on revaluation of property, 3.4 -
plant & equipment
Items that will not be reclassified to Income
Statement in subsequent years:
Actuarial gain on retirement benefits 10 16.8 3.6
Deferred income tax charge on actuarial (2.8) (0.4)
gain on retirement benefits
Net loss recognised directly within (0.3) (16.7)
Other Comprehensive Income
Profit/(loss) for the year attributable 66.3 (72.9)
to equity shareholders
Comprehensive income/(expense) for the financial 66.0 (89.6)
year attributable to equity shareholders
CONSOLIDATED CONDENSED BALANCE SHEETAS AT 28 FEBRUARY 2018
2018 2017
Notes EURm EURm
ASSETS
Non-current assets
Property, plant & equipment 135.2 144.5
Goodwill & intangible assets 541.1 530.3
Equity accounted investments 48.4 2.4
Retirement benefits 10 4.8 4.5
Deferred income tax assets 1.7 3.2
Trade & other receivables 40.4 49.6
771.6 734.5
Current assets
Assets held for resale - 1.7
Inventories 88.1 85.8
Trade & other receivables 79.9 78.5
Cash 145.5 187.6
313.5 353.6
1085.1 1,088.1
TOTAL ASSETS
EQUITY
Capital and reserves attributable to
the equity holders of the company
Equity share capital 3.2 3.3
Share premium 143.4 136.9
Treasury shares (37.3) (38.0)
Other reserves 82.6 99.1
Retained income 341.7 337.1
Total equity 533.6 538.4
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings 383.5 358.6
Retirement benefits 10 3.8 22.3
Provisions 7.8 7.7
Deferred income tax liabilities 11.2 6.0
406.3 394.6
Current liabilities
Trade & other payables 132.7 144.1
Provisions 3.6 6.5
Current income tax liabilities 8.9 4.5
145.2 155.1
Total liabilities 551.5 549.7
TOTAL EQUITY & LIABILITIES 1085.1 1,088.1
CONSOLIDATED CONDENSED CASHFLOW STATEMENTFOR THE YEARED 28
FEBRUARY 2018
2018 2017
EURm EURm
CASH FLOWS FROM OPERATING ACTIVITIES
Group profit/(loss) for the year attributable 66.3 (72.9)
to equity shareholders
Finance income (0.1) (0.1)
Finance expense 8.2 7.9
Income tax expense 5.9 10.0
Profit on share of equity accounted investments (1.2) -
Revaluation/impairment of property, 5.0 25.8
plant & equipment
Recovery of previously impaired investment - (0.5)
in equity accounted investment
Impairment of intangible assets - 106.6
Depreciation of property, plant & equipment 14.0 14.7
Amortisation of intangible assets 0.3 0.3
Net profit on disposal of property, (0.8) (3.9)
plant & equipment
Charge for equity settled share-based payments 0.9 0.7
Pension contributions paid plus amount (2.2) (7.0)
credited to Income Statement
96.3 81.6
Increase in inventories (3.5) (2.9)
Decrease in trade & other receivables 5.2 4.0
Decrease in trade & other payables (6.8) (13.3)
Decrease in provisions (2.6) (4.6)
88.6 64.8
Interest received 0.1 0.1
Interest and similar costs paid (6.5) (6.6)
Income taxes paid (5.9) (6.9)
Net cash inflow from operating activities 76.3 51.4
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment (14.0) (22.7)
Net proceeds on disposal of property, 3.7 25.6
plant & equipment
Acquisition of subsidiaries (net of cash acquired) (10.3) -
Net cash outflow re acquisition of (44.2) (1.5)
equity accounted investments
Net cash (outflow)/inflow from investing activities (64.8) 1.4
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of share 2.1 1.0
options/equity interests
Drawdown of debt 86.8 138.7
Repayment of debt (61.2) (134.0)
Shares purchased to satisfy (0.1) (0.2)
share option entitlements
Shares purchased under share buyback programme (33.1) (23.2)
Dividends paid (40.6) (34.9)
Net cash outflow from financing activities (46.1) (52.6)
(Decrease)/increase in cash (34.6) 0.2
Reconciliation of opening to closing cash
Cash at beginning of year 187.6 197.3
Translation adjustment (7.5) (9.9)
Net (decrease)/increase in cash (34.6) 0.2
Cash at end of financial year 145.5 187.6
A reconciliation of cash to net debt is presented in note 9.
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR Equity Share Other Capital Share-basedpayments Currency Revaluation Treasury Retained TotalED share premium undemoninated reserve reserve translation reserve shares income
28 FEBRUARY 2018 capital Reserve reserve
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
At 28 February 3.3 127.8 0.7 24.9 6.4 79.9 9.1 (39.2) 471.8 684.7
2016
Loss for - - - - - - - - (72.9) (72.9)
the year
attributable
to
equity
shareholders
Other - - - - - (17.8) (2.1) - 3.2 (16.7)
comprehensive
expense
Total - - - - - (17.8) (2.1) - (69.7) (89.6)
comprehensive
(expense)/income
Dividend on - 8.1 - - - - - - (43.0) (34.9)
ordinary
shares
Exercised share - 0.8 - - - - - - - 0.8
options
Reclassification - - - - (2.0) - - - 2.0 -
of share-based
payments reserve
Joint Share - 0.2 - - (0.7) - - 1.2 (0.8) (0.1)
Ownership
Plan
Shares purchased - - - - - - - - (23.2) (23.2)
under share
buyback
programme
andsubsequently
cancelled
Equity settled - - - - 0.7 - - - - 0.7
share-based
payments
Total - 9.1 - - (2.0) - - 1.2 (65.0) (56.7)
transactions
with owners
At 28 February 3.3 136.9 0.7 24.9 4.4 62.1 7.0 (38.0) 337.1 538.4
2017
Profit for - - - - - - - - 66.3 66.3
the year
attributable
to
equity
shareholders
Other - - - - - (17.7) 3.4 - 14.0 (0.3)
comprehensive
(expense)/income
Total - - - - - (17.7) 3.4 - 80.3 66.0
comprehensive
(expense)/income
Dividend on - 4.4 - - - - - - (45.0) (40.6)
ordinary
shares
Exercised share - 1.4 - - - - - - - 1.4
options
Reclassification - - - - (3.0) - - - 3.0 -
of share-based
payments reserve
Joint Share - 0.7 - - (0.2) - - 0.7 (0.6) 0.6
Ownership
Plan
Shares purchased (0.1) - 0.1 - - - - - (33.1) (33.1)
under share
buyback
programme
andsubsequently
cancelled
Equity settled - - - - 0.9 - - - - 0.9
share-based
payments
Total (0.1) 6.5 0.1 - (2.3) - - 0.7 (75.7) (70.8)
transactions
with owners
At 28 February 3.2 143.4 0.8 24.9 2.1 44.4 10.4 (37.3) 341.7 533.6
2018
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. BASIS OF PREPARATION
The financial information presented in this report has been
prepared in accordance with the Listing Rules of the Irish Stock
Exchange and the UK Listing Authority and the accounting policies
that the Group has adopted under International Financial Reporting
Standards (IFRS) as approved by the European Union and issued by
the International Accounting Standards Board (IASB) for the
financial year ended 28 February 2018.
2.STATUTORY ACCOUNTS
The financial information prepared in accordance with IFRS as
adopted by the European Union included in this report does not
constitute the statutory financial statements for the purposes of
Chapter 4 of Part 6 of the Companies Act 2014. Full statutory
accounts for the year ended 28 February 2018 prepared in accordance
with IFRS, upon which the auditors have given an unqualified
report, have not yet been filed with the Registrar of Companies.
Full accounts for the year ended 28 February 2017, prepared in
accordance with IFRS and containing an unqualified audit report
have been delivered to the Registrar of Companies.
The information included has been extracted from the Group's
financial statements, which have been approved by the Board of
Directors on 16 May 2018.
3. REPORTING CURRENCY
The Group's financial statements are presented in Euro millions
to one decimal place. The results of the Group's subsidiaries with
non-Euro functional currencies have been translated into Euro at
average exchange rates for the year with the related balance sheets
consolidated using the closing rate at the balance sheet date.
Foreign currency movements arising on restatement of the results
and opening net assets of non-Euro functional currency companies at
closing rates are recognised in the Currency Translation Reserve
via the Statement of Comprehensive Income, together with currency
movements arising on foreign currency borrowings designated as net
investment hedges and currency movements arising on retranslation
of the Group's long-term sterling and US dollar intra-group loans
which are considered quasi equity in nature and part of the Group's
net investment in its foreign operations.
The exchange rates used in translating Sterling and US Dollar
balance sheet and income statement amounts were as follows:-
2018 2017
Balance Sheet (closing rate): Euro: Sterling (GBP) GBP0.884 GBP0.853
Income Statement (average rate): Euro: Sterling (GBP) GBP0.881 GBP0.834
Balance Sheet (closing rate): Euro: US Dollars ($) $1.221 $1.060
Income Statement (average rate): Euro: US Dollars ($) $1.157 $1.101
4. SEGMENTAL REPORTING
The Group's business activity is the manufacturing, marketing
and distribution of branded beer, cider, wine, soft drinks and
bottled water. Three operating segments have been identified in the
current financial years; Ireland, Great Britain and
International.
The Group continually reviews and updates the manner in which it
monitors and controls its financial operations resulting in changes
in the manner in which information is classified and reported to
the Chief Operating Decision Maker ("CODM"). The CODM, identified
as the executive Directors, assesses and monitors the operating
results of segments separately via internal management reports in
order to effectively manage the business and allocate resources.
Due to a consolidation in the management of the business, the Group
has changed its basis of segmentation in the current financial
year. The previous segments of Scotland and C&C Brands are now
managed by one Managing Director and are supported by the one
management team. The Group has therefore now combined both, to form
the new segment Great Britain. The previous segments of Export and
North America are also now controlled by one Managing Director and
the one management team and have therefore also been combined into
the new International segment. The current basis of segmentation
reflects the new business model and in all instances the changes
were deemed necessary to better enable the CODM to evaluate the
results of the business in the context of the economic environment
in which the business operates, to make appropriate strategic
decisions and to more accurately reflect the business model under
which the Group now operates in these territories. All comparative
amounts have been restated to reflect the new basis of
segmentation. The reclassification had no impact on revenue, net
revenue or operating profit reported by the Group.
The identified business segments are as follows:-
(i) Ireland
This segment includes the financial results from sale of own
branded products in the Island of Ireland, principally Bulmers,
Outcider, Tennent's, Magners, Clonmel 1650, Five Lamps, Heverlee,
Roundstone Irish Ale, Dowd's Lane traditional craft ales, Finches
and Tipperary Water. It also includes the financial results from
beer, wines and spirits distribution and wholesaling, following the
acquisition of Gleeson, the results from sale of third party brands
as permitted under the terms of a distribution agreement with AB
InBev and production of 3rd party products.
(ii) Great Britain
This segment includes the results from sale of the Group's own
branded products in Scotland, England and Wales, with Tennent's,
Magners, Heverlee, Caledonia Best, Blackthorn, Olde English,
Chaplin & Cork's and K Cider the principal brands. It also
includes the financial results from AB InBev beer distribution in
Scotland, third party brand distribution and wholesaling in
Scotland, following the acquisition of the Wallaces Express
wholesale business, the distribution of the Italian lager Menabrea
and the production and distribution of private label products.
(iii) International
This segment includes the results from sale of the Group's cider
and beer products, principally Magners, Gaymers, Woodchuck, Wyders,
Blackthorn, Hornsby's and Tennent's in all territories outside of
Ireland and Great Britain. It also includes the production, sale
and distribution of some private label and third party brands.
The analysis by segment includes both items directly
attributable to a segment and those, including central overheads,
which are allocated on a reasonable basis in presenting information
to the CODM.
Inter-segmental revenue is not material and thus not subject to
separate disclosure.
(a) Analysis by reporting segment
2018 2017
Revenue Net Operating Revenue Net Operating
revenue profit as restated* revenue profit
as restated*
EURm EURm EURm EURm EURm EURm
Ireland 312.1 215.0 40.1 345.0 245.4 48.6
Great 459.8 292.7 39.5 465.4 302.3 39.9
Britain
International 41.6 40.5 6.5 50.4 48.8 6.5
Total 813.5 548.2 86.1 860.8 596.5 95.0
before
exceptional
items
Exceptional - - (7.0) - - (150.1)
items
(note 6)
Finance - - 0.1 - - 0.1
income
Finance - - (8.2) - - (7.9)
expense
Share of - - 1.2 - - -
equity
accounted
investments'
after
tax
Total 813.5 548.2 72.2 860.8 596.5 (62.9)
* See note 13 prior year reclassification for further
details.
Of the exceptional loss in the current year of EUR7.0m on a
before tax basis, EUR4.6m relates to Ireland, EUR1.9m relates to
Great Britain and EUR0.5m does not relate to any particular
segment. Of the exceptional loss in the prior year EUR150.1m,
EUR10.3m relates to Ireland, EUR9.1m relates to Great Britain,
EUR129.8m relates to International and EUR0.9m does not relate to
any particular segment. Of the share of equity accounted
investments' profit after tax, EUR1.1m relates to Admiral Taverns
which is included in the Great Britain segment and EUR0.1m relates
to our Canadian investment which is included in the International
segment.
Total assets for the period ended 28 February 2018 amounted to
EUR1,085.1m (2017: EUR1,088.1m).
The impact of the reclassification to three operating segments
as previously described, along with current year like for like
comparatives, is outlined below. This reclassification has no
impact on the revenue, net revenue and operating profit reported by
the Group.
2018 2017
Revenue Net Operating Revenue Net Operating
revenue profit as restated* revenue profit
as restated*
EURm EURm EURm EURm EURm EURm
Previously 307.5 211.5 32.6 311.4 213.0 32.6
Scotland
Previously 152.3 81.2 6.9 154.0 89.3 7.3
C&C
Brands
New 459.8 292.7 39.5 465.4 302.3 39.9
segment
- Great
Britain
Previously 19.6 18.6 1.4 26.6 25.1 0.7
North
America
Previously 22.0 21.9 5.1 23.8 23.7 5.8
Export
New 41.6 40.5 6.5 50.4 48.8 6.5
segment
-
International
* See note 13 prior year reclassification for further
details.
(b) Other operating segment information
2018 2017
CapitalexpenditureEURm Depreciation/amortisation/impairmentEURm CapitalexpenditureEURm Depreciation/amortisation/impairmentEURm
Ireland 8.6 12.3 20.3 8.1
Great Britain 1.5 5.6 2.1* 7.5*
International 0.6 1.4 3.4** 109.0**
Total 10.7 19.3 25.8 124.6
* Capital expenditure in the prior year for Scotland was
EUR2.1m, depreciation/amortisation/impairment was EUR5.3m for
Scotland and EUR2.2m for C&C Brands.** Capital expenditure in
the prior year for North America was EUR2.8m and for Export was
EUR0.6m, depreciation, amortisation, impairment was EUR108.4m for
North America and EUR0.6m for Export.
(c) Geographical analysis of revenue and net revenue
Revenue Net revenue
2018 2017 2018 2017
EURm EURm EURm EURm
As restated* As restated*
Ireland 312.1 345.0 215.0 245.4
Scotland 307.5 311.4 211.5 213.0
England and Wales** 152.3 154.0 81.2 89.3
US and Canada*** 19.6 26.6 18.6 25.1
Other**** 22.0 23.8 21.9 23.7
Total 813.5 860.8 548.2 596.5
* See note 13 prior year reclassification for further
details.**England and Wales is included in the Great Britain
segment.*** US and Canada is included in the International
segment.****Other is included in the International segment, being
all other geographical locations excluding Ireland, Great Britain,
the US and Canada.
The geographical analysis of revenue and net revenue is based on
the location of the third party customers.
(d) Geographical analysis of non-current assets
Ireland Scotland Englandand US Other***EURm Total
EURm EURm Wales*EURm andCanada**EURm EURm
28 February
2018
Property, 68.9 52.5 - 8.4 5.4 135.2
plant
& equipment
Goodwill & 155.9 132.5 196.8 39.8 16.1 541.1
intangible
assets
Equity 0.3 0.2 44.6 3.3 - 48.4
accounted
investments
Retirement 4.8 - - - - 4.8
benefits
Deferred 1.7 - - - - 1.7
income
tax assets
Trade & 18.5 21.9 - - - 40.4
other
receivables
Total 250.1 207.1 241.4 51.5 21.5 771.6
Ireland Scotland Englandand US Other***EURm Total
EURm EURm Wales*EURm andCanada**EURm EURm
29 February
2017
Property, 70.3 58.0 0.3 9.9 6.0 144.5
plant
& equipment
Goodwill & 156.1 126.4 187.2 44.6 16.0 530.3
intangible
assets
Equity 0.3 0.3 - 1.8 - 2.4
accounted
investments
Retirement 4.5 - - - - 4.5
benefits
Deferred 3.2 - - - - 3.2
income
tax assets
Trade & 20.6 25.6 1.2 1.8 0.4 49.6
other
receivables
Total 255.0 210.3 188.7 58.1 22.4 734.5
* England and Wales is included in the Great Britain segment.**
US and Canada is included in the International segment.***Other is
included in the International segment, being all other geographical
locations excluding Ireland, Great Britain, the US and Canada.
The geographical analysis of non-current assets, with the
exception of goodwill & intangible assets, is based on the
geographical location of the assets. The geographical analysis of
goodwill & intangible assets is allocated based on the country
of destination of sales at date of acquisition.
5. CYCLICALITY OF OPERATIONS
Certain brands within our portfolio, particularly our cider
brands, tend to have higher consumption during the summer months
that fall within the first half of our financial year. In addition,
external forces such as weather & significant sporting events
(which traditionally take place in the summer months) will have a
greater impact on our first half trading. Accordingly, trading
profit is usually higher in the first half than in the second.
Operating profit before exceptional items for the financial year
ended 28 February 2018 was split H1: 59% and H2: 41%.
6.EXCEPTIONAL ITEMS
2018 2017
EURm EURm
Operating costs
Restructuring Costs 1.9 12.7
Revaluation/impairment of property, plant & equipment 5.0 25.8
Acquisition related expenditure 0.1 0.9
Onerous Lease - 7.0
Impairment of intangible asset - 106.6
Net profit on disposal of property, plant & equipment - (2.9)
Total loss before tax 7.0 150.1
Income tax credit (5.4) (3.0)
Total loss after tax 1.6 147.1
(a) Restructuring costs
Restructuring costs of EUR1.9m were incurred in the current
financial year (FY2017: EUR12.7m) primarily relating to severance
costs of EUR1.5m arising from the change in the distribution
arrangements with AB InBev in England and Wales, as well as other
restructuring initiatives in our strategy and export divisions
within the Group. Other costs of EUR0.4m primarily relate to the
closure of a warehousing facility. The restructuring costs in the
prior year of EUR12.7m comprised of severance costs of EUR7.2m and
other costs of EUR5.5m primarily due to the consolidation of the
Group's manufacturing sites.
(b) Revaluation/impairment of property, plant &
equipment
Property (comprising land and buildings) and plant &
machinery are valued at fair value on the Balance Sheet and
reviewed for impairment on an annual basis. The Group engages
external valuation teams triennially and during the intervening
year's management undertake a valuation assessment internally.
During the current financial year, the Group engaged external
valuers to value the land and buildings and plant and machinery at
the Group's Clonmel, Tipperary and Wellpark (Glasgow) sites, along
with depots in Dublin, Cork and Galway. Using the valuation
methodologies, this resulted in a net revaluation loss of EUR5.0m
accounted for in the Income Statement and a gain of EUR3.4m
accounted for within Other Comprehensive Income.
During the prior financial year, the Group engaged external
valuers to value the land and buildings and plant and machinery at
the Group's Vermont site. Using the valuation methodologies, this
resulted in a revaluation loss of EUR17.7m with respect to the land
and buildings and a revaluation loss of EUR5.1m with respect to the
plant and machinery which was accounted for in the Income
Statement. Also during the prior financial year the Group took the
decision to market value some of our assets at Borrisoleigh,
Ireland, which resulted in the booking of an impairment charge of
EUR1.5m and we took a decision to impair an element of the Group's
IT system by EUR1.5m post the closure of Shepton Mallet.
(c) Acquisition related expenditure
In the current financial year the Group incurred professional
fees of EUR0.1m (2017:EUR0.9m) associated with the assessment and
consideration of strategic opportunities by the Group during the
year.
(d) Income tax credit
Of the total amount of EUR5.4m, EUR4.4m related to the
reassessment of the calculation of deferred income tax balances
arising on historical business combinations.
(e) Onerous lease
During the prior financial year, the Group reviewed the carrying
value of its onerous lease provision to take into account the
latest estimate of associated costs less economic value with regard
to the two pre-existing onerous leases up until their final
disposal. The discount rate applied to the liability was also
re-assessed. In the prior year, this resulted in an increase in the
provision of EUR6.8m. This element of the onerous lease provision
relates to two onerous leases in relation to warehousing facilities
acquired as part of the acquisition of the Gaymers cider business
in 2010. One of the onerous leases expired in 2017 and the other is
due to expire in 2026. In the prior year, an onerous lease with
regard to a surplus facility at its US business of EUR0.2m has
since expired.
(f) Impairment of intangible asset
To ensure that goodwill and brands considered to have an
indefinite useful economic life are not carried at above their
recoverable amount, impairment reviews are performed annually or
more frequently if there is an indication that their carrying
amount may not be recoverable, comparing the carrying value of the
assets with their recoverable amount using value-in-use
computations. In the prior financial year, as a result of such a
review, the Group impaired the value of its intangible assets with
respect to the Group's North American business by EUR106.6m.
(g) Net profit on disposal of property, plant &
equipment
In the prior financial year, the Group disposed of land &
buildings and plant & machinery which were surplus to
requirements arising from the Group's consolidation of its
production facilities realizing a net profit of EUR2.9m.
7. DIVIDS
2018 2017
EURm EURm
Dividends paid:
Final: paid 9.37c per ordinary share in July 29.0 27.7
2017 (2017: 8.92c paid in July 2016)
Interim: paid 5.21c per ordinary share in December 16.0 15.3
2017 (2017: 4.96c paid inDecember 2016)
Total equity dividends 45.0 43.0
Settled as follows:
Paid in cash 40.6 34.9
Scrip dividend 4.4 8.1
45.0 43.0
The Directors have proposed a final dividend of 9.37 cent per
share (2017: 9.37 cent), to ordinary shareholders registered at the
close of business on 25 May 2018, which is subject to shareholder
approval at the Annual General Meeting, giving a proposed total
dividend for the year of 14.58 cent per share (2017: 14.33 cent).
Using the number of shares in issue at 28 February 2018 and
excluding those shares for which it is assumed that the right to
dividend will be waived, this would equate to a distribution of
EUR30.3m.
Total dividends of 14.58 cent per ordinary share were recognised
as a deduction from the retained income reserve in the year ended
28 February 2018 (2017: 13.88 cent).
Final dividends on ordinary shares are recognised as a liability
in the financial statements only after they have been approved at
an Annual General Meeting of the Company. Interim dividends on
ordinary shares are recognised when they are paid.
8. EARNINGS PER SHARE
2018 2017
Number Number
'000 '000
Denominator computations
Number of shares at beginning of year 325,546 329,158
Shares issued in lieu of dividend 1,368 2,209
Shares issued in respect of options exercised 454 318
Shares repurchased and subsequently cancelled (9,492) (6,139)
Number of shares at end of year 317,876 325,546
Weighted average number of ordinary shares (basic)* 308,164 310,431
Adjustment for the effect of conversion of options 249 995
Weighted average number of ordinary shares, 308,413 311,426
including options (diluted)
* excludes 11.0m treasury shares (2017: 11.9m)
Profit attributable to ordinary shareholders 2018 2017
EURm EURm
Earnings as reported 66.3 (72.9)
Adjustment for exceptional items, net of tax (note 6) 1.6 147.1
Earnings as adjusted for exceptional items, net of tax 67.9 74.2
Basic earnings per share Cent Cent
Basic earnings per share 21.5 (23.5)*
Adjusted basic earnings per share 22.0 23.9
Diluted earnings per share
Diluted earnings per share 21.5 (23.5)*
Adjusted diluted earnings per share 22.0 23.8
* In the prior year, due to the reported loss for the year the
basic and diluted earnings per share are the same.
Basic earnings per share is calculated by dividing the profit
attributable to the ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding
ordinary shares purchased/issued by the Company and accounted for
as treasury shares (at 28 February 2018: 11.0m shares; at 28
February 2017: 11.9m shares).
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. The average
market value of the Company's shares for purposes of calculating
the dilutive effect of share options was based on quoted market
prices for the period of the year that the options were
outstanding.
Employee share awards (excluding awards which were granted under
plans where the rules stipulate that obligations must be satisfied
by the purchase of existing shares), which are performance-based
are treated as contingently issuable shares because their issue is
contingent upon satisfaction of specified performance conditions in
addition to the passage of time and continuous employment. In
accordance with IAS 33 Earnings per Share, these contingently
issuable shares are excluded from the computation of diluted
earnings per share where the vesting conditions would not have been
satisfied as at the end of the reporting period (1,649,124 at 28
February 2018 and 3,424,695 at 28 February 2017). If dilutive other
contingently issuable ordinary shares are included in diluted EPS
based on the number of shares that would be issuable if the end of
the reporting period was the end of the contingency period.
9. ANALYSIS OF NET DEBT
1 March2017 Translationadjustment Cash flow,net Non-cashchanges 28 February2018
EURm EURm EURm EURm EURm
Group
Interest bearing loans & borrowings 358.2* (1.1) 25.6 0.4 383.1
Cash (187.6) 7.5 34.6 - (145.5)
170.6 6.4 60.2 0.4 237.6
*Interest bearing loans & borrowings at 28 February 2018 are net of unamortised issue costs of EUR0.7m of which EUR0.4m is classified onthe balance sheet as a current asset.
1 March2016 Translationadjustment Cash flow,net Non-cashchanges 28 February2017
EURm EURm EURm EURm EURm
Group
Interest bearing loans & borrowings 360.3* (7.8) 4.7 1.0 358.2*
Cash (197.3) 9.9 (0.2) - (187.6)
163.0 2.1 4.5 1.0 170.6
*Interest bearing loans & borrowings at 28 February 2017 are net of unamortised issue costs of EUR1.1m of which EUR0.4m is classified onthe balance sheet as a current asset.
The non-cash change to the Group's interest bearing loans and
borrowings relate to the amortisation of issue costs of 0.4m (2017:
EUR1.0m).
Borrowing facilities
The Group manages its borrowing requirements by entering into
committed loan facility agreements.
In December 2014, the Group amended and updated its committed
EUR450m multi-currency five year syndicated revolving loan facility
with seven banks, namely Bank of Ireland, Bank of Scotland,
Barclays Bank, Danske Bank, HSBC, Rabobank, and Ulster Bank,
repayable in a single instalment on 22 December 2019. The facility
agreement provides for a further EUR100m in the form of an
uncommitted accordion facility and permits the Group to avail of
further financial indebtedness, excluding working capital and
guarantee facilities, to a maximum value of EUR150m, subject to
agreeing the terms and conditions with the lenders. Consequently
the Group is permitted under the terms of the agreement, to have
debt capacity of EUR700m of which EUR383.8m was drawn at 28
February 2018 (2017: EUR359.3m). The Group is currently in the
process of conducting an exercise to renew the existing facility in
advance of this date.
Under the terms of the agreement, the Group must pay a
commitment fee based on 40% of the applicable margin on undrawn
committed amounts and variable interest on drawn amounts based on
variable Euribor/Libor interest rates plus a margin, the level of
which is dependent on the net debt: EBITDA ratio, plus a
utilisation fee, the level of which is dependent on percentage
utilisation. The Group may select an interest period of one, three
or six months.
All non-current bank loans drawn under the Group's
multi-currency revolving loan facility are guaranteed by a number
of the Group's subsidiary undertakings. The facility agreement
allows the early repayment of debt without incurring additional
charges or penalties. All such non-current bank loans under the
Group's multi-currency revolving loan facility are repayable in
full on change of control of the Group.
The Group's multi-currency debt facility incorporates two
financial covenants:
-- Interest cover: The ratio of EBITDA to net interest for a period of 12
months ending on each half-year date will not be less than
3.5:1
-- Net debt/EBITDA: The ratio of net debt on each half-year date to
EBITDA for a period of 12 months ending on a half-year date will
not
exceed 3.5:1
The Group complied with both covenants throughout the current
and prior financial year.
10. RETIREMENT BENEFITS
The Group operates a number of defined benefit pension schemes
for certain employees, past and present, in the Republic of Ireland
(ROI) and in Northern Ireland (NI), all of which provide pension
benefits based on final salary and the assets of which are held in
separate trustee administered funds. The Group closed its defined
benefit pension schemes to new members in March 2006 and provides
only defined contribution pension schemes for employees joining the
Group since that date. The Group provides permanent health
insurance cover for the benefit of certain employees and separately
charges this to the Income Statement.
The defined benefit pension scheme assets are held in separate
trustee administered funds to meet long-term pension liabilities to
past and present employees. The trustees of the funds are required
to act in the best interest of the funds' beneficiaries. The
appointment of trustees to the funds is determined by the schemes'
trust documentation. The Group has a policy in relation to its
principal staff pension fund that members of the fund should
nominate half of all fund trustees.
There are no active members remaining in the Executive defined
benefit pension scheme (2017: no active members). There are 57
active members, representing less than 10% of total membership, in
the ROI Staff defined benefit pension scheme (2017: 62 active
members) and 4 active members in the NI defined benefit pension
scheme (2017: 4 active members). The Group's ROI defined benefit
pension reform programme concluded during the financial year ended
29 February 2012 with the Pensions Board issuing a directive under
Section 50 of the Pensions Act 1990 to remove the mandatory pension
increase rule, which guaranteed 3% per annum increase to certain
pensions in payment, and to replace it with guaranteed pension
increases of 2% per annum for each year 2012 to 2015 and thereafter
for all future pension increases to be awarded on a discretionary
basis.
Actuarial valuations - funding requirements
Independent actuarial valuations of the defined benefit pension
schemes are carried out on a triennial basis using the attained age
method. The most recent actuarial valuations of the ROI defined
benefit pension schemes were carried out with an effective date of
1 January 2015 while the date of the most recent actuarial
valuation of the NI defined benefit pension scheme was 31 December
2014. The triennial valuation is currently ongoing and at the date
of this Annual Report have not yet been finalised. The actuarial
valuations are not available for public inspection; however the
results of the valuations are advised to members of the various
schemes.
The funding requirements in relation to the Group's ROI defined
benefit pension schemes are assessed at each valuation date and are
implemented in accordance with the advice of the actuaries. Arising
from the formal actuarial valuations of the main schemes the Group
has committed to contributions of 22% of pensionable salaries along
with a deficit contribution of EUR1.2m per annum until the next
valuation date for the Group's Staff defined benefit pension
scheme. There is no funding requirement with respect to the Group's
Executive defined benefit pension scheme in 2018. The funding
requirement will be reviewed again as part of the next triennial
valuation 2018. The 2014 actuarial valuation of the NI defined
benefit pension scheme confirmed it was in surplus and the scheme
remains in surplus.
The schemes' independent actuary, Mercer (Ireland) Limited, has
employed the projected unit credit method to determine the present
value of the defined benefit obligations arising and the related
current service cost.
At 28 February 2018, the retirement benefits computed in
accordance with IAS 19(R) Employee Benefits amounted to a net
surplus of EUR1.0 million gross of deferred income tax (EUR3.8m
deficit with respect to the ROI schemes and a EUR4.8m surplus with
respect to the NI scheme) and a deficit of EUR0.1 million net of
deferred income tax (FY2017: EUR17.8 million gross and EUR15.9
million net of deferred income tax).
The movement in the net deficit is as follows:-
EURm
Deficit at 1 March 2018 17.8
Employer contributions paid (1.2)
Actuarial gain (16.8)
Credit to the Income Statement (1.0)
FX adjustment on retranslation 0.2
Net surplus at 28 February 2018 (1.0)
The decrease in the deficit from EUR17.8 million to a surplus of
EUR1.0 million is primarily driven by the actuarial gain of EUR16.8
million, there are two main reasons being 1) a reduction in the
future improvement assumption rates in line with the latest
findings of the research arm of the Institute and Faculty of
Actuaries, the Continuous Mortality Investigation (CMI), 2) Gain
due to change in financial assumptions due to higher discount rates
as set by corporate bond yields, this is marginally offset by an
increase in future inflation expectations. All other significant
assumptions applied in the measurement of pension obligations at 28
February 2018 are broadly consistent with those as applied at 28
February 2017.
11. RELATED PARTY TRANSACTIONS
The principal related party relationships requiring disclosure
in the consolidated financial statements of the Group under IAS 24
Related Party Disclosures pertain to the existence of subsidiary
undertakings and equity accounted investments, transactions entered
into by the Group with these subsidiary undertakings and equity
accounted investments and the identification and compensation of,
and transactions with, key management personnel.
Transactions
Transactions between the Group and its related parties are made
on terms equivalent to those that prevail in arm's length
transactions.
Subsidiary undertakings
The consolidated financial statements include the financial
statements of the Company and its subsidiaries. Sales to and
purchases from subsidiary undertakings, together with outstanding
payables and receivables, are eliminated in the preparation of the
consolidated financial statements in accordance with IFRS 10
Consolidated Financial Statements.
Equity accounted investments
In the current financial year, On 6 December 2017, the Group
entered into a joint venture arrangement for a 49.9% share in Brady
P&C Limited, a UK incorporate entity with Proprium Capital
Partners (50.1%). Brady P&C Limited subsequently incorporated a
UK company, Brady Midco Limited where Admiral management acquired
6.5% of the shares. Brady Midco Limited incorporated Brady Bidco
Limited which acted as the acquisition vehicle to acquire the
entire share capital of AT Brit Holdings Limited (trading as
Admiral Taverns) on the 6 December 2017. The equity investment by
the Group is GBP37.4m (EUR42.4 euro equivalent on date of
investment) representing 46.65% of the issued share capital of
Admiral Taverns. Admiral Taverns currently own and operates over
850 pubs, mainly in England and Wales, with a broad geographic
distribution.
On 28 July 2017, the Group acquired 10.7% of the equity share
capital of a Canadian Company for CAD$2.5m (EUR1.8m euro equivalent
on date of investment,). In the prior financial year, on 11 May
2016, the Group acquired 14% of the equity share capital of a
Canadian Company, for CAD$2.5m (EUR1.7m euro equivalent on date of
investment).
In the prior financial year, on 20 December 2016, the Group
acquired 25% of the equity share capital of Whitewater Brewing
Company Limited, an Irish Craft brewer for GBP0.3m (EUR0.3m).
During the financial year ended 28 February 2015, the Group
entered into a joint venture arrangement with Heather Ale Limited,
run by the Williams brothers who are recognised as leading family
craft brewers in Scotland, to form a new entity Drygate Brewing
Company Limited. The joint venture, which is run independently of
the joint venture partners existing businesses, operates a craft
brewing and retail facility adjacent to Wellpark brewery. Details
of transactions during the current and prior financial year and
outstanding year end balances are disclosed below.
The Group also holds a 50% investment in Beck & Scott
(Services) Limited (Northern Ireland) and a 45.61% investment in
The Irish Brewing Company Limited (Ireland) following its
acquisition of Gleeson. Transactions between the Group and Beck
& Scott (Services) Limited (Northern Ireland) are disclosed
below. The Group had no transactions with The Irish Brewing Company
Limited (Ireland) which is a non-trading entity.
A subsidiary of the Group holds a 33% investment in Shanter Inns
Limited. Transactions between the Group and Shanter Inns are
disclosed below.
Loans extended by the Group to equity accounted investments are
considered trading in nature and are included within advances to
customers in Trade & other receivables.
Details of transactions with equity accounted investments during
the year and related outstanding balances at the year end are as
follows:-
Net revenue Balance outstanding
2018 2017 2018 2017
EURm EURm EURm EURm
Sale of goods to equity
accounted investments:
Beck & Scott (Services) Limited 0.2 0.2 - -
(Northern Ireland)
Drygate Brewing Company Limited 0.3 0.2 0.2 0.1
Shanter Inns Limited 0.3 - - -
0.8 0.4 0.2 0.1
Balance outstanding
2018 2017
EURm EURm
Loans to equity accounted
investments:
Canadian Investment 1.9 1.8
Whitewater Brewing 0.6 0.7
Company Limited
Drygate Brewing Company Limited 1.7 0.7
Shanter Inns Limited 0.2 -
4.4 3.2
Purchases Balance outstanding
2018 2017 2018 2017
EURm EURm EURm EURm
Purchase of goods from equity
accounted investments:
Whitewater Brewing 0.3 0.1 - -
Company Limited
Drygate Brewing Company Limited 0.3 0.6 0.2 0.2
0.6 0.7 0.2 0.2
All outstanding trading balances with equity accounted
investments, which arose from arm's length transactions, are to be
settled in cash within one month of the reporting date.
Key management personnel
For the purposes of the disclosure requirements of IAS 24
Related Party Disclosures, the Group has defined the term 'key
management personnel', as its executive and non-executive
Directors. Executive Directors participate in the Group's equity
share award schemes, permanent health insurance (or reimbursement
of premiums paid into a personal policy) and death in service
insurance programme. Executive Directors may also benefit from
medical insurance under a Group policy (or the Group will reimburse
premiums). No other non-cash benefits are provided. Non-executive
Directors do not receive share-based payments nor post employment
benefits.
Details of key management remuneration are as follows:-
2018 2017
Number Number
Number of individuals 12 10
EURm EURm
Salaries and other short term employee benefits 2.7 2.4
Post employment benefits 0.3 0.3
Equity settled share-based payments 0.7 0.1
Termination payment 0.2 -
Further amount paid re exercise of JSOP Interests - 0.2
Dividend equivalent payment with - 0.6
respect to JSOP Interests
Total 3.9 3.6
During the year and pursuant to a contract for services
effective as of 1 April 2014 between C&C IP Sàrl ('CCIP') and
Joris Brams BVBA ('JBB'), (a company wholly owned by Joris Brams
and family), CCIP paid fees of EUR91,550 to JBB in respect of brand
development services provided by JBB to CCIP in relation to Belgian
products.
For the purposes of the Section 305 of the Companies Act, 2014,
the aggregate gains by Directors on the exercise of share options
during FY2018 was EUR166,576 (FY2017 EURnil).
Two of the Group's executive Directors were awarded Interests
under the Group's Joint Share Ownership Plan (JSOP). When an award
is granted to an executive under the Group's JSOP, its value is
assessed for tax purposes with the resulting value being deemed to
fall due for payment on the date of grant. Under the terms of the
Plan, the executive must pay the Entry Price at the date of grant
and, if the tax value exceeds the Entry Price, they must pay a
further amount, equating to the amount of such excess, before an
exercise/sale of the awarded Interests. The deferral of the payment
of the further amount was considered to be an interest-free loan by
the Company to the executive and a taxable benefit-in-kind arose,
charged at the Revenue stipulated rates (Ireland 13.5% from 1
January 2013 and UK 3.25% to 5 April 2015 and 3.0% from 6 April
2015). In the prior financial year the Group's executive Directors
exercised their JSOP Interests and paid the further amount on
exercise. Under the terms of the Plan, when the further amount is
paid, the Company compensates the executive for the obligation to
pay this further amount by paying him an equivalent amount, which
is however, subject to income tax and social security in the hands
of the executive. This compensation is disclosed in the table above
under further amount.
12. POST BALANCE SHEET EVENTS
On 4th April 2018, C&C Group plc acquired the entire issued
share capital of Matthew Clark (Holdings) Limited and Bibendum PLB
(Topco) Limited and their subsidiary businesses, Catalyst,
Peppermint, Elastic and Walker & Wodehouse (together "Matthew
Clark Bibendum"). Matthew Clark Bibendum enhances the Group's route
to market for cider and super-premium brands across the on-trade
and off-trade in the UK.
The Group acquired Matthew Clark Bibendum for a nominal sum of
GBP1 and is providing sufficient funds to support the ongoing
working capital and other cash requirements of the business. The
initial accounting for the acquisition is currently in progress.
The Group has commenced a detailed review of the accounting
policies applied to ensure consistency with the Group policies and
procedures. Given the status of the accounting for this
acquisition, the Directors are not in a position to make the
necessary disclosures required under IFRS 3 (2008) Business
Combinations at the date of approval of these financial
statements.
13. PRIOR YEAR RECLASSIFICATION
2017 Restatement Restated2017
Revenue 818.1 42.7 860.8
Excise duties (258.6) (5.7) (264.3)
Operating costs before (464.5) (37.0) (501.5)
exceptional items
Operating costs after (614.6) (37.0) (651.6)
exceptional items
In anticipation of the implementation of IFRS 15 Revenue from
Contracts with Customers from 1 March 2018, management has begun
examining the accounting for revenue for certain arrangements. In
respect of certain of the Group's arrangements with third parties
entered into in order to utilise excess capacity, management has
determined that income from such arrangements, previously netted
from operating costs, should more appropriately be recorded gross,
as revenue. Accordingly, management have changed the classification
of such income in the Income Statement for the year ended 28
February 2018. In the current year, the amount recorded that would
have been netted from operating costs was EUR36.5m and accordingly,
in the prior year Income Statement line items have been restated as
follows: gross revenue has increased by EUR42.7m, excise duties
have increase by EUR5.7m, and net sales revenue and operating costs
have increased by EUR37.0m. Applicable notes have accordingly also
been adjusted. The restatement has no impact on net income or net
assets for the prior year.
14. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved by the Directors on 16
May 2018.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180515006776/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
May 16, 2018 02:00 ET (06:00 GMT)
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