C&C Chairman

C&C is reporting net revenue of €476.9 million, operating profit(i) of €113.9 million and adjusted diluted EPS(ii) of 27.7 cent.

This represents a moderate decline of 0.8% in net revenue (decline of 5.5% on a constant currency(iii) basis) but an operating profit(i) increase of 2.4% (up 0.4% on a constant currency(iii) basis) equating to an operating margin of 23.9%, an increase of 0.8 percentage points on the prior year (up 1.4 percentage points on a constant currency (iii) basis).

In challenging domestic markets, the results achieved highlight both the resilience and adaptability of the C&C business model and the importance of growth from international markets.


Table 1 – Key financial indicators
Financial Summary



Net revenue

€m 476.9 480.8


€m 135.6 131.4

Adjusted Diluted EPS(ii)

Cent 27.7 27.6

Free cash flow(v)

€m 54.8 102.6

Free cash flow conversion ratio

40.4% 78.1%

Net (debt)/cash (vi)

€m (123.4) 68.3

Dividend per share

Cent 8.75 8.17

Dividend cover

31.6% 29.6%


Net interest paid

€m 1.9 3.9

Interest Cover

41.1 34.6

Net debt/EBITDA

0.9 -

Net debt as percentage of market capitalisation

7.3% n/a

Share price performance

Share price at 28/29 February

€4.895 €3.665

52 week high

€4.94 €3.69

52 week low

€3.17 €2.70

Market capitalisation at year-end

€m 1,686 1,243

(i) Before exceptional items.

(ii) See note 10.

(iii) On a constant currency basis, constant currency calculation is set out on this page.

(iv) EBITDA: Earnings before exceptional items, interest, tax, depreciation and amortisation and inclusive of discontinued operations.

(v) Free Cash Flow is a non-GAAP measure that comprises cash flow from operating activities net of capital investment cash outflows which form part of investing activities. Free Cash Flow highlights the underlying cash generating performance of the ongoing business, see this page.

(vi) Net debt comprises cash and borrowings, net of issue costs of €2.2m (FY2012:NIL).

The performance of each of the Group’s reporting segments is discussed in detail in the Operations Review on this page,
in summary the key drivers of this financial performance were:-

  • Stable performance from ROI in second half of financial year: poor weather dominated financials in the first half of the financial year. However, trading stabilised in the second half with LAD volume for the Group up 1.5% compared to a decline of 3.2% in the first 6 months. Price/Mix deflation also improved from 9.1% in the first 6 months to 6.2% in the second 6 months.
  • A tough year for cider in the UK: The GB cider category experienced its first volume decline in almost a decade as poor weather depressed consumption in the key summer months. Net revenue for C&C’s Cider UK business unit declined 20.2% with operating profits, on a constant currency basis, down 15.6% to €30.9m. Operating margins, on a constant currency basis, improved by 1.2ppts as marketing plans were adapted to reflect the challenging trading environment.
  • Tennent’s going from strength to strength: Despite a decline in volume, the prioritisation and focus on share growth within more profitable channels contributed to a positive mix and net revenue growth of 6.8% for the year. Operating margins grew by 5.7ppt, a consequence of improved pricing and robust cost control. The brand remains in good health across all of its territories.
  • Increasing scale of International. FY2013 was a significant year for the development of an international business within the Group with the acquisition of the Vermont Hard Cider Company, LLC (VHCC) in December. The international business unit enjoyed good volume growth of 55.2% in the period, 34.8% excluding the two months worth of contribution from VHCC since acquisition. The new business provides C&C with a great opportunity to tap into the fast growing US cider category. The contribution from Tennent’s, introduced to a number of new markets during the year, is encouraging.
  • Currency: applying this year’s effective rates to last year’s operating profit improves FY2012 reported profits by a net €2.2 million as a result of a strengthening in the sterling effective translation rate which was partially offset by a weakening in the effective transaction rate.


As required by European Union (EU) law, the Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), applicable Irish law and the Listing Rules of the Irish and London Stock Exchanges. Details of the basis of preparation and the significant accounting policies are outlined on this page.


Net finance costs reduced to €4.9 million (2012: €5.1 million) reflecting a reduction in average drawn debt during the period, the benefit of no fixed interest contracts, offset by a reduction in interest income earned. On a time weighted basis the average drawn debt reduced from €92 million during FY2012 to €49 million in FY2013, reflecting the fact that the Group was debt free for almost 9 months of the year prior to the acquisition of VHCC. Net finance costs are also inclusive of an unwind of discount on provisions charge of €1.0 million (2012: €1.0 million).

The income tax charge in the year excluding exceptional items amounted to €16.0 million. This represents an effective tax rate of 14.7%, an increase of 1.7 percentage points on the prior year. The increase is primarily due to the increased proportion of profits arising in the UK. The effective tax rate at 14.7% reflects the fact that, currently, the majority of the Group’s profits are earned in either Ireland or the UK, both of whom have competitive tax rates relative to European averages.

Subject to shareholder approval, the proposed final dividend of 4.75 cent per share will be paid on 12 July 2013 to ordinary shareholders registered at the close of business on 24 May 2013. The Group’s full year dividend will therefore amount to 8.75 cent per share, a 7.1% increase on the previous year. The proposed full year dividend per share will represent a payout of 31.6% (FY2012: 29.6%) of the full year reported adjusted diluted earnings per share. A scrip dividend alternative will be available. Total dividends paid to ordinary shareholders in the current financial year amounted to €28.4 million of which €21.2 million was paid in cash, €0.1 million was accrued with respect to LTIP (Part I) dividend entitlements while €7.1 million or 25% (FY2012: 19%) was settled by the issue of new shares.


The Group posted to operating profits a net expense of €4.6 million before tax in relation to a number of items, which due to their nature and materiality were classified as exceptional items for reporting purposes, a presentation which in the opinion of the Board, provides a more helpful analysis of the underlying performance of the Group.

The items which were classified as exceptional include:-

(a) Restructuring costs: comprising severance and other initiatives arising from cost cutting initiatives and the consolidation of the Group’s offices in the UK and US, resulted in an exceptional charge before taxation of €1.2 million (2012: €4.6 million).

(b) Acquisition related costs of €3.3 million: comprising costs directly attributed to the acquisition of VHCC and the Gleeson Group, the latter which was completed post year-end.

(c) IT Systems implementation & integration costs of €1.1 million: primarily relating to the integration of the previously acquired Hornsby’s brand with the Group’s existing business.

(d) Inventory recovery: juice stocks which were previously impaired were recovered and used by the Group’s cider business during the current financial year resulting in a write back of juice stocks to operating profit at their recoverable value of €1.0 million. As the original impairment charge was accounted for as an exceptional cost the write-back has also been accounted for in this manner.


A key strength of the Group remains the strength of its balance sheet.

Total assets reported by the Group were €1,200.3 million at 28 February 2013 (2012: €960.8 million). The Group’s portfolio of market leading brands and related goodwill is valued at €705.8 million (2012: €483.3 million). The current year increase primarily reflects the acquisition of VHCC.

Brand values and goodwill are assessed for impairment on a regular basis with the Directors concluding that no material adjustments to the assumptions underlying the impairment testing models applied would result in any foreseeable risk of an impairment arising.

In addition, the Group generated Free Cash Flow of €54.8 million in the period, reflecting an EBITDA to Free Cash Flow conversion ratio of 40.4%. The Group ended the year in a net debt position of €123.4 million (2012: net cash €68.3 million) as a result of the current year acquisitions and related debt drawdown. The Group had undrawn committed facilities available of €103.4 million as at 28 February 2013.

Debt management

During the year the Group used existing cash resources to repay and cancel the outstanding balance on the 2007 committed facility (€60.0 million). Subsequent to the acquisition of VHCC and the pending acquisition of the Gleeson Group, the Group had drawn debt of €246.6 million at year-end.

In February 2012, the Group entered into a committed €250.0 million multi-currency five year syndicated revolving loan facility with seven banks, repayable on 28 February 2017. The facility agreement provided for a further €100.0 million in the form of an uncommitted accordion facility which was successfully negotiated as committed, but was not utilised, during the financial year. In addition the Group is permitted to have additional indebtedness to a maximum value of €150.0 million. In total therefore, under the terms of the agreement, the Group has a total debt capacity of €500.0 million.

Cash generation

Management reviews the Group’s cash generating performance by measuring the conversion of EBITDA to Free Cash Flow as we consider that this metric best highlights the underlying cash generating performance of the ongoing business.

The Group ended the year with an EBITDA to Free Cash Flow conversion ratio of 40.4% (2012: 78.1%). The current year cash flow performance reflects a number of factors. Working capital was negative, primarily as a consequence of adding VHCC to the Group and exiting transitional service arrangements for the Hornsby’s brand during the year. FY2012 working capital movements had enjoyed the benefit of some slow recovery of credit due to customers. The sustained challenges of the trading environment appear to have sharpened cash recovery across the board, negatively impacting our working capital movement in FY2013 as a consequence. The Group increased advances to customers in the period, primarily in Scotland. Capital expenditure also increased in the current year. FY2013 capital expenditure includes the purchase of land in Vermont that was purchased by the Group post the acquisition of VHCC.

Net finance costs of the Group reduced due to the reduction in average drawn debt for the period, the benefit of no fixed interest contracts in the current year offset by a reduction in interest income earned. Taxation payments increased in line with an increased proportion of UK taxable profits.

A summary cash flow statement is set out in Table 2 on this page.

Table 2 – Cash flow summary

2013 2012

€m €m

Operating profit (i)

113.9 111.1


21.7 20.3


135.6 131.4


Working capital

(21.8) 13.5

Advances to customers

(16.7) (5.5)

Net capital expenditure

(24.1) (17.7)

Net finance costs

(1.9) (3.9)

Tax paid

(8.5) (4.4)

Exceptional items paid

(4.9) (8.7)


(2.9) (2.1)


Free cash flow(iii)

54.8 102.6

Free cash flow conversion ratio

40.4% 78.1%


Proceeds on disposal of operations

- 4.7

Proceeds from exercise of share options

3.5 1.5

Proceeds with respect to Joint Share Ownership Plan

- 0.1

Proceeds from the sale of shares held by Employee Trust

6.6 -

Proceeds from issue of new shares following acquisition of subsidiary

5.3 -

Acquisition of brand & business/deferred consideration paid

(233.5) (16.6)

Acquisition of equity accounted investees

(2.9) -

Dividends paid in cash

(21.2) (18.5)


(Increase)/reduction in net debt

(187.4) 73.8


Net cash/(debt) at beginning of year

68.3 (6.3)

Translation adjustment

(3.7) 1.1

Non cash movement

(0.6) (0.3)


Net (debt)/cash(iv) at end of year

(123.4) 68.3

* other relates to the share options add back, pensions charged to operating profit before exceptional items less contributions paid and profit on disposal of plant & equipment

(i) before exceptional costs and inclusive of discontinued activities.

(ii) EBITDA: Earnings before exceptional items, interest, tax, depreciation and amortisation and inclusive of discontinued operations.

(iii) Free Cash Flow is a non-GAAP measure that comprises cash flow from operating activities net of capital investment cash outflows which form part of investing activities.
Free Cash Flow highlights the underlying cash generating performance of the ongoing business.

(iv) Net Debt comprises cash and borrowings, net of issue costs of €2.2m (2012 : nil).


In compliance with IFRS, the net assets and actuarial liabilities of the various defined benefit pension schemes operated by the Group companies, computed in accordance with IAS 19 Employee Benefits, are included on the face of the Group balance sheet as retirement benefit obligations.

In FY2012 the Group worked with the Pension Scheme Trustees to implement pension reform in order to manage the Group’s funding risk. The process concluded with the Pensions Board issuing a Section 50 directive to remove the mandatory pension increase rule, which guaranteed 3% per annum increase to certain pensions in payment, and replaced it with guaranteed pension increases of 2% per annum for each of the 3 years 2012, 2013 and 2014 and thereafter future pension increases to be awarded on a discretionary basis.

A Funding Proposal was also approved by the Pensions Board which commits the Group to contributions of 14% of Pensionable Salaries to fund future pension accrual of benefits; a deficit contribution of €3.4 million; and an additional supplementary deficit contribution of €1.9 million for which C&C reserves the right to reduce or terminate on consultation with the Trustees and on advice from the Scheme Actuary that it is no longer required due to a correction in market conditions. The level of future funding commitment is in line with current funding levels. The Directors believe that the agreed plan will enable the schemes to meet the Minimum Funding Standard by 31 December 2016.

At 28 February 2013, the retirement benefit obligations on the IAS 19 basis amounted to €21.5 million gross and €18.8 million net of deferred tax (FY2012: €15.1 million gross and €13.2 million net of deferred tax). The movement in the deficit is as follows:-


Deficit at 1 March 2012


Employer contributions paid


Actuarial loss


Charge to the Income Statement


Net deficit at 28 February 2013


The retirement benefit deficit computed in accordance with IAS 19 was impacted by a number of factors, namely:-

  • actuarial loss: €12. 3 million recognised as a result of a reduction in the discount rate applied to liabilities: ROI schemes reduced from 4.7% - 4.9% at 29 February 2012 to 3.8% - 4.25% at 28 February 2013. For the UK scheme the discount rate reduced from 4.75% at 29 February 2012 to 4.4% at 28 February 2013,
  • Employer contributions: €7.2 million

All other significant assumptions applied in the measurement of the Group’s pension obligations at 28 February 2013 are broadly consistent with those as applied at 29 February 2012.


The most significant financial market risks that the Group is exposed to include foreign currency exchange rate risk, commodity price fluctuations, interest rate risk and creditworthiness risk in relation to its counterparties.

The board of Directors set the treasury policies and objectives of the Group, the implementation of which is monitored by the Audit Committee. There has been no significant change during the financial year to the Board’s approach to the management of these risks. Details of both the policies and control procedures adopted to manage these financial risks are set out in detail in note 23 to the financial statements.

Debt and interest rate risk management

It is Group policy to ensure that a structure of medium/long term debt funding is in place to provide it with the financial capacity to promote the future development of the business and to achieve its strategic objectives. The Group manages its borrowing ability by entering into committed loan facility agreements. Currently the Group has a multi-currency five year syndicated loan facility, entered into in February 2012 with seven banks including Bank of Ireland, Bank of Scotland, Barclays Bank, Danske Bank, HSBC, Rabobank, and Ulster Bank. The principal agreement provided the Group with debt capacity of up to €250.0 million and in addition provided for a further €100.0 million in the form of an uncommitted accordion facility which the Group successfully negotiated, as committed, in December 2012.

The Group’s cash deposits are all invested on a short term basis with banks who are members of the Group’s banking syndicate.

Table 3 – Constant Currency Comparatives

Year ended
29 February 2012


Year ended 29 February 2012
Constant currency

€m €m €m €m



142.5 - - 142.5

Cider UK

218.6 - 14.2 232.8

Tennent’s UK

209.9 - 13.6 223.5


30.7 0.8 0.4 31.9

Third party brands UK

115.0 - 7.4 122.4


716.7 0.8 35.6 753.1


Net revenue



101.4 - - 101.4

Cider UK

162.1 - 10.5 172.6

Tennent’s UK

95.8 - 6.2 102.0


30.6 0.8 0.4 31.8

Third party brands UK

90.9 - 5.9 96.8


480.8 0.8 23.0 504.6


Operating profit



44.4 (0.7) - 43.7

Cider UK

35.2 0.6 0.8 36.6

Tennent’s UK

21.2 - 1.3 22.5


6.8 (0.2) 0.2 6.8

Third party brands UK

3.6 - 0.2 3.8


111.2 (0.3) 2.5 113.4

Currency risk management

The Group publishes its consolidated financial statements in euro but transacts business in other currencies. By entering into foreign currency transactions and by the consolidation of the results of its non-euro reporting foreign operations the Group is exposed to both transaction and translation foreign currency rate risk.

The Group hedges a portion of its exposure to the sterling and US dollar value of its foreign operations by designating sterling and dollar borrowings as net investment hedges and enters into forward rate hedge agreements to hedge an appropriate portion of the transaction exposure borne by its subsidiary undertakings for a period of up to two years ahead. Currency transaction exposures primarily arise on the sterling and US dollar denominated sales of its euro subsidiaries.

The principal foreign currency forward contracts in place at
28 February 2013 are:

Sterling USD

Local Currency

Amount (m)

20.0 1.0

Average forward rate


0.81 1.24

Where hedge accounting is applied, hedges are documented and tested for effectiveness on an ongoing basis. All currency hedges are based on forecasted exposures and meet the requirements of IAS 39 Financial Instruments: Recognition and Measurement to qualify as cash flow hedges. The fair value of all outstanding hedges at 28 February 2013 as calculated by reference to current market value amounted to a net asset of €1.7 million (2012: €0.8 million net liability) and this has been included on the balance sheet under “derivative financial assets and liabilities”.

The effective rate for the translation of results from sterling currency operations was €1:£0.81 (year ended 29 February 2012: €1:£0.87) and the effective rate for the translation of sterling currency revenue/net revenue transactions by euro functional currency operations resulted in an effective rate of €1:£0.86 (year ended 29 February 2012: €1:£0.85) at operating profit level.

Comparisons for revenue, net revenue and operating profit 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 FY2013 effective rates. Applying the realised FY2013 foreign currency rates to the reported FY2012 revenue, net revenue and operating profit rebases the comparatives as shown in Table 3 on this page.

Commodity price and other risk management

The Group is exposed to commodity price fluctuations, and manages this risk, where economically viable, by entering into fixed price supply contracts with suppliers. The Group does not directly enter into commodity hedge contracts. The cost of production is also sensitive to variability in the price of energy, primarily gas and electricity. It is Group policy to fix the cost of a certain level of its energy requirement through fixed price contractual arrangements directly with its energy suppliers.

The Group seeks to mitigate risks in relation to the continuity of supply of key raw materials and ingredients by developing trade relationships with key suppliers. The Group has over 60 long-term apple supply contracts with farmers in the west of England and has an agreement with malt farmers in Scotland for the supply of barley.

In addition, the Group enters into insurance arrangements to cover certain insurable risks where external insurance is considered by management to be an economic means of mitigating these risks.

Kenny Neison

Group Chief Financial Officer

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