Interim Results
C&C Group Plc
12 October 2006
C&C GROUP PLC
INTERIM RESULTS
FOR SIX MONTHS ENDED 31 AUGUST 2006
Dublin, London, 12 October 2006: C&C Group plc ('C&C' or the 'Group'), a leading
manufacturer, marketer and distributor of branded beverages in Ireland and the
UK, today announced its interim results for the six months ended 31 August,
2006.
Financial & Operating Highlights
Financial Highlights (i)
O Revenue growth of 27%
O Operating profit growth of 66%
O Earnings growth of 79%
O Adjusted basic EPS of 28.7 cent - an increase of 77%
O Interim dividend of 12.0 cent per share - an increase of 85%
O Free cash flow of €81.6 million (65% of EBITDA)
O Net debt reduced by €62.6 million to €320.5 million
Operating Highlights
O Operating profit margin increase of five percentage points to 21.3%
O Volume of the Group's cider brands grew by 85%
O Extended distribution of Magners nationally in Great Britain
O Bulmers significantly outperformed the Irish LAD (ii) market
O Volume for the Group's Irish whiskey brand, Tullamore Dew, grew by 25%
O Marketing investment for the period increased by 53%
(i) Comparisons exclude exceptional items.
(ii) Long alcohol drinks market.
(iii) Free Cash Flow (FCF)/Earning before interest tax
depreciation and amortisation (EBITDA).
Investors and analysts Irish Media International Media
Mark Kenny or Jonathan Neilan Paddy Hughes or Ann Marie Curran Edward Orlebar
K Capital Source Drury Communications M Communications
Tel: +353 1 631 5500 Tel: +353 1 260 5000 Tel: +44 207 153 1523
Email :c&cgroup@kcapitalsource.com Email: phughes@drurycom.com Email: orlebar@mcomgroup.com
Summary results for six months ended 31 August 2006
C&C is reporting operating profit before exceptional items of €113.5 million and
adjusted earnings per share of 28.7 cent for the six months ended 31 August
2006, increases of 66% and 77% respectively. The Group generated free cash flow
of €81.6 million for the period.
Maurice Pratt, Group Chief Executive Officer, commented "C&C is pleased to
report very strong earnings growth, notwithstanding significant marketing
investment behind the Magners brand.
"This financial performance reflects strong growth from the Group's cider
division. Magners has recorded rapid growth in the UK while Bulmers delivered
continued strong growth in Ireland. C&C's performance in both markets was helped
by favourable summer weather."
Disposal
C&C signed an agreement for the sale of its snacks subsidiary, Tayto Crisps
Limited, on 5 July 2006 for a gross consideration of €62.3m. The transaction was
completed on 21 September 2006 and will be accounted for in the results to 28
February 2007. Proceeds arising from this disposal will be applied towards debt
reduction.
Dividends and Dividend Policy
The Group will pay an interim dividend for the period of 12 cent per share, an
85% increase on last year. The interim dividend will be paid on 13 December 2006
to shareholders on the Group's register at the close of business on 20 October
2006. A scrip dividend option will also be available.
The dividend increase is broadly in line with C&C's reported earnings growth.
Exceptional Items
The exceptional items in the Group income statement comprise a profit of €4.6
million on the disposal of surplus property in the Snacks division and a
goodwill impairment of €8.3 million arising in the Distribution division. C&C
will lose the distribution rights to the wine brands owned by the Fosters Group
in early 2007. This will reduce profits in the Distribution division and the
Group, as indicated in its first half trading statement, is writing off the €8.3
million carrying value of goodwill attributed to that division at 28 February
2006.
Outlook
C&C expects the strong market performance of its Cider division to be sustained
in the second half of the year. The Cider division is the principal driver of C&
C's earnings growth and its performance should lead to an acceleration in the
rate of overall Group operating profit growth for the second half of the 2006/07
year compared with the rate of growth in the half year to 31 August 2006.
In the International Spirits & Liqueurs division depletions growth is expected
to continue. However, the expected reversal of the stock build up in the first
half year is likely to impact negatively on the results in the second half.
The combined Soft Drinks & Snacks and Distribution divisions are expected to
perform in line with prior year on a comparable basis, (adjusting for the
disposal of Snacks and the loss of the distribution of Danone and Allied Domecq
brands).
Beyond 2006/07, the Group's primary objective is to deliver continued earnings
growth through the further development of Magners in the UK and Bulmers in
Ireland and Tullamore Dew internationally. C&C has commenced an expansion of its
cider manufacturing capacity in Clonmel at an approximate cost of €200 million,
to support sustained growth.
The resulting investment in both fixed and working capital will reduce the
Group's FCF/EBITDA (iii) expectation to a 30%-40% range in each of 2006/07 and
2007/08 fiscal years. The decline in the FCF/EBITDA(iii) ratio, however, will
not affect the Group's dividend policy.
OPERATIONS REVIEW
Summary
Revenue and operating profit increased by 27% and 66% respectively in the six
months ended 31 August 2006 compared with the same period last year.
This principally reflects growth in the Cider division arising from the
continued growth of the Magners and Bulmers brands. The Group's operating profit
margin increased by 5 percentage points which reflects an increase in Cider
margins and the mix benefit of the strong growth in the higher margin Cider
division. Operating margins increased in all divisions other than Distribution.
Summary Group income statement (before exceptional items)
Six months ended Six months ended
31 August 2006 31 August 2005
€m €m
Revenue 532.1 419.5
Growth 27%
Operating Profit 113.5 68.4
Growth 66%
Operating Profit Margin 21.3% 16.3%
Net Finance Charges (7.8) (10.3)
Taxation (12.2) (6.0)
Profit attributable to 93.5 52.1
Ordinary shareholders
Growth 79%
Profit attributable to ordinary shareholders increased by 79% in the period. In
addition to operating profit growth, this increase reflects a decline in
interest charges arising from a reduction in the level and cost of debt over the
period and an increase in the effective tax charge from 10.3% to 11.5% due to a
higher proportion of net income subject to UK taxation.
Divisional Review: Cider
Six months ended Six months ended Growth
31 August 2006 31 August 2005 Year-on-Year
€m €m
Revenue 269.5 144.5 86.6%
Operating Profit 90.0 45.1 99.6%
Operating margin 33.4% 31.2%
Revenue for the Cider division of €269.5 million represents an 86.6% increase on
2005 and reflects an 85% increase in sales volume. Operating profit doubled to
€90.0 million against €45.1 million in 2005. Operating margin, at 33.4%,
increased by 2.2 percentage points year-on-year.
The Group's international cider brand, Magners, having been previously launched
in Scotland and Greater London, was successfully rolled out nationally in Great
Britain at the start of the fiscal year. The rollout was helped by the excellent
summer weather in Great Britain. In addition to growth as a result of the
rollout, Magners' more established regions of Scotland, Greater London and
Northern Ireland have continued to show good volume gains in the period. The
overall volume growth for the brand was 264% in the half year.
It is estimated that the overall LAD market in the Republic of Ireland was flat
in terms of volume in the six months ended August 2006 and that, within this,
the on-trade showed modest decline and the off-trade strong growth. Bulmers
outperformed the LAD market and grew in volume terms by 7% in the period. This
strong performance reflected good summer weather and strong brand fundamentals.
The increase in operating margin derives from the scale of growth in revenue.
Marketing investment, although up by more than 100% year-on-year, only increased
as a percentage of revenue by just over one point.
Divisional Review: International Spirits & Liqueurs
Six months ended Six months ended Growth
31 August 2006 31 August 2005 Year-on-Year
€m €m
Revenue 36.1 28.9 24.9%
Operating Profit 9.8 7.6 28.9%
Operating margin 27.1% 26.3%
Revenue for the International Spirits & Liqueurs division of €36.1 million
represents a 24.9% increase on 2005 levels. Operating profit increased 28.9% to
€9.8 million against €7.6 million in 2005. Operating margin, at 27.1%, increased
by 0.8 percentage points year-on-year.
Overall volume shipments increased 20% in the period and this was, in part, due
to stock building by distributors. It is estimated that depletions growth in the
period was approximately 5%. Within this overall depletions performance
Tullamore Dew continued to show good growth while Carolans has shown strong
recovery in its principal market, North America.
Divisional Review: Soft Drinks & Snacks
Six months ended Six months ended Growth
31 August 2006 31 August 2005 Year-on-Year
€m €m
Revenue 125.3 129.3 (3.1%)
Operating Profit 13.5 13.3 1.5%
Operating margin 10.8% 10.3%
Revenue for the Soft Drinks & Snacks division of €125.3 million represents a
3.1% decline on 2005 levels. Operating profit increased to €13.5 million against
€13.3 million in 2005. Operating margin, at 10.8%, was 0.5 percentage points
ahead of last year.
The overall soft drinks market volume grew by an estimated 2-3% in the period
reflecting, in part, the favourable summer weather. A modest decline in
carbonated soft drinks was offset by strong growth in bottled water. The snacks
market showed modest decline in the period.
The revenue decrease in the period reflected the loss of the distribution rights
for the Danone water brands. On a comparable basis, revenue grew by 2%
comprising 3% growth for soft drinks and a decline of 3% for snacks.
The improvement in operating margin is a result of production outsourcing of
snacks and reduced marketing investment in soft drinks brands.
Divisional Review: Distribution
Six months ended Six months ended Growth
31 August 2006 31 August 2005 Year-on-Year
€m €m
Revenue 101.2 116.8 (13.4%)
Operating Profit 0.2 2.4 (92%)
Operating margin 0.2% 2.1%
Revenue for the Distribution division of €101.2 million represents a 13.4%
decline on 2005 levels. Operating profit declined by 92% to €0.2 million
compared to €2.4 million in 2005.
Operating margin at 0.2% fell by 1.9 percentage points year-on-year.
The decline in revenue and operating profit was due to the loss of the former
Allied Domecq brands; weaker demand for premium wines; and reduced margin on LAD
agency brands.
FINANCE REVIEW
Cash Flow
Free cash flow, for the six months ended 31 August 2006, amounted to €81.6
million. This represented 65% of EBITDA compared to 79% in the corresponding
prior period. The reduced percentage is due to increased investment in fixed
assets and working capital. Working capital investment was €17.2 million higher
than the corresponding prior period as a result of the increase in the level of
activity.
Capital expenditure in the period amounted to €31.9 million compared to €6.2
million in the corresponding prior period. The main component of expenditure in
the period related to the expansion of cider production facilities. Disposals,
which amounted to €14 million, arose principally from the sale of the snacks
plant in Dublin following the outsourcing of manufacturing in October 2005.
Finance Costs
Finance costs for the half year at €7.8 million were €2.5 million lower than in
2005, reflecting the impact of reduced debt levels and lower interest margins.
The Group has hedged over 70% of its projected net debt for the next four years
at base rates ranging from 3.1% to 3.5% and net interest costs were covered 16
times by EBITDA before exceptional items.
Net Debt
Net debt at 31 August 2006 amounted to €320.5 million which is €62.6 million
lower than at 28 February 2006.
Movement in net debt was as follows:
€m
Net debt at 1 March 2006 383.1
Free cash flow in period (81.6)
Dividends Paid 19.8
Other (0.8)
Net debt at 31 August 2006 320.5
At 31 August 2006 EV gearing (net debt/market capitalisation plus net debt) was
10%.
Comparative reporting
Profits for each division in the Operations Review are shown at actual exchange
rates. Revenue and profit figures for each division for the period ended 31
August 2005 have not been re-translated at 2006 exchange rates as the impact is
not material.
The impact of re-translating the results for the six months ended 31 August 2005
to 2006 average exchange rates would increase Group revenue by €1.0 million and
Group operating profit by €0.3 million for the period.
Special note regarding forward-looking information
Some statements in this Announcement are forward-looking. They represent our
expectations for our business, and involve risks and uncertainties. We have
based these forward-looking statements on our current expectations and
projections about future events. We believe that our expectations and
assumptions with respect to these forward-looking statements are reasonable.
However, because they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond our control, our actual results or
performance may differ materially from those expressed or implied by such
forward-looking statements.
Group income statement
for the six months ended 31 August 2006
Six months ended 31 August 2006 Six months ended 31 August 2005
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
€m €m €m €m €m €m
Revenue 532.1 - 532.1 419.5 - 419.5
Operating costs (418.6) (3.7) (422.3) (351.1) (8.3) (359.4)
-
Operating profit 113.5 (3.7) 109.8 68.4 (8.3) 60.1
Finance income 0.8 - 0.8 0.4 - 0.4
Finance costs (8.6) - (8.6) (10.7) - (10.7)
Profit before tax 105.7 (3.7) 102.0 58.1 (8.3) 49.8
Income tax expense (12.2) (0.5) (12.7) (6.0) 0.9 (5.1)
Profit attributable to ordinary
shareholders 93.5 (4.2) 89.3 52.1 (7.4) 44.7
Basic earnings per share (cent) 27.4 13.9
Diluted earnings per share (cent) 27.1 13.8
Group statement of recognised income and expense
for the six months ended 31 August 2006
€m €m
Income and expense recognised directly in equity:
Exchange difference arising on the net liabilities of
foreign operations 0.2 0.1
Exchange difference arising on the net investment in foreign
operations 0.2 0.2
Movement in cashflow hedging reserve 0.8 (3.0)
Deferred tax liability on cashflow hedging reserve (0.1) 0.4
Actuarial gain on defined benefit pension schemes 1.8 4.6
Deferred tax on defined benefit pension schemes 0.3 (0.4)
Total income and expense recognised directly in equity 3.2 1.9
Profit attributable to ordinary shareholders 89.3 44.7
Total recognised income and expense for the period 92.5 46.6
Group Balance Sheet
as at 31 August 2006
31-Aug-06 31-Aug-05 28-Feb-06
Notes (audited)
€m €m €m
Assets
Non-current assets
Goodwill 453.6 461.9 461.9
Property, plant & equipment 152.1 128.0 134.1
Derivative financial assets - - 1.0
Deferred tax 8.9 7.8 9.1
614.6 597.7 606.1
Current assets
Inventories 56.2 53.5 55.1
Trade & other receivables 191.6 146.9 114.0
Cash & cash equivalents 97.3 62.7 44.5
Assets held for sale - 4.8 6.8
345.1 267.9 220.4
Total assets 959.7 865.6 826.5
Equity
Share capital 6 3.3 3.2 3.3
Share premium 6 27.5 12.8 18.6
Reserves 6 27.7 19.8 26.0
Retained income 6 235.1 150.3 171.2
Total equity 293.6 186.1 219.1
Liabilities
Non-current liabilities
Interest bearing loans and borrowings 4 392.8 437.0 407.6
Derivative financial liabilities 0.1 2.9 0.7
Retirement benefit obligations 55.2 49.9 58.9
Provisions 1.7 1.7 1.9
Deferred tax 5.3 5.5 5.7
455.1 497.0 474.8
Current liabilities
Interest bearing loans and borrowings 4 25.0 20.0 20.0
Derivative financial liabilities 1.7 4.6 2.5
Trade & other payables 163.7 146.9 102.7
Current tax liabilities 20.6 11.0 7.4
211.0 182.5 132.6
Total liabilities 666.1 679.5 607.4
Total equity and liabilities 959.7 865.6 826.5
Group cash flow statement
for the six months ended 31 August 2006
6 months ended 6 months ended
31 August 2006 31 August 2005
€m €m
Cash flows from operating activities
Profit attributable to ordinary shareholders 89.3 44.7
Adjustments for:
Finance income (0.8) (0.4)
Finance costs 8.6 10.7
Income tax expense 12.7 5.1
Depreciation of property, plant & equipment 11.1 10.1
Impairment of plant & equipment - 2.6
Impairment of goodwill 8.3 -
Profit on disposal of property, plant & equipment (4.6) (2.8)
Charge for share-based employee benefits 0.8 0.5
Pensions charged to operating profit less contributions paid (2.0) 1.6
Provision movement - IPO costs - (0.1)
Provision movement - re-organisation costs - 6.5
123.4 78.5
Increase in inventories (1.1) (4.4)
Increase in trade & other receivables (79.9) (47.4)
Increase in trade & other payables 64.4 51.2
106.8 77.9
Interest received 0.8 0.4
Interest paid (8.3) (9.9)
Income tax refunded / (paid) 0.2 (1.0)
Net cash inflow from operating activities 99.5 67.4
Cash flows from investing activities
Purchase of property, plant & equipment (31.9) (6.2)
Sale of property, plant & equipment 14.0 0.7
Net cash outflow from investing activities (17.9) (5.5)
Cash flows from financing activities
Net issue / redemption of ordinary share capital 1.0 -
Bank loans repaid (10.0) (10.0)
New bank loans drawn down / issue costs paid - (0.5)
Dividends paid (19.8) (14.7)
Net cash outflow from financing activities (28.8) (25.2)
Net increase in cash & cash equivalents 52.8 36.7
Cash & cash equivalents at beginning of period 44.5 26.0
Cash & cash equivalents at end of period 97.3 62.7
Notes to the interim results for the six months ended 31 August 2006
1. Basis of preparation
The interim accounts, which are abridged and unaudited, have been prepared on
the basis of the accounting policies expected to apply for the financial year to
28 February 2007. The accounting policies have been applied on a basis
consistent with those applied in the consolidated financial statements for the
year ended 28 February 2006.
The income tax expense for the six month period is calculated by applying the
directors' best estimate of the annual effective tax rate to the profit for the
period.
The interim results were approved by the Board on 12 October 2006.
2. Segmental analysis
Six months ended 31 August Six months ended 31 August
2006 2005
Class of business analysis Revenue *Net result Revenue *Net result
€m €m €m €m
Cider 269.5 90.0 144.5 45.1
International Spirits & Liqueurs 36.1 9.8 28.9 7.6
Soft Drinks & Snacks 125.3 13.5 129.3 13.3
Distribution 101.2 0.2 116.8 2.4
532.1 113.5 419.5 68.4
*Net result represents profit before finance costs and exceptional items
3. Earnings per ordinary share
Six months ended 31 Six months ended 31
August 2006 August 2005
€m €m
Earnings as reported 89.3 44.7
Adjustments for exceptional items net of tax 4.2 7.4
Earnings adjusted for exceptional items 93.5 52.1
'000 '000
Number of shares at beginning of period 325,204 321,130
Shares issued in lieu of dividend 1,236 2,923
Options exercised 380 -
Number of shares at end of period 326,820 324,053
Weighted average number of ordinary shares 325,841 321,940
Weighted average number of ordinary shares including share
options 329,637 323,302
Basic earnings per share - cent 27.4 13.9
Diluted earnings per share - cent 27.1 13.8
Adjusted basic earnings per share - cent 28.7 16.2
4. Details of Borrowing
2006 2005
€m €m
Maturity analysis
Current
0-1 year 25.0 20.0
25.0 20.0
Non-current
1-2 years 30.0 25.0
2-3 years 15.0 30.0
3-4 years - 15.0
4-5 years 347.8 367.0
392.8 437.0
Unamortised issue costs of €2.2m have been netted against outstanding bank loans
repayable between 2 and 5 years.
5. Analysis of net debt
Cash & cash Bank loans due Bank loans due Net debt
equivalents within one year after one year
€m €m €m €m
At 1 March 2006 (44.5) 20.0 407.6 383.1
At 31 August 2006 (97.3) 25.0 392.8 320.5
6. Reserves
Reserves
Share Share Capital Cashflow Shares to be Currency Retained 2006 2005
capital premium reserve* Hedging issued translation Income Total Total
reserve reserve
€m €m €m €m €m €m €m €m €m
Group
At 28 February 3.3 18.6 25.2 (1.5) 1.7 0.6 171.2 219.1 153.7
2006
Total recognised
Income and expense
for the period - 0.7 - 0.4 91.4 92.5 46.6
Dividend on
ordinary shares - 7.9 - - - - (27.7) (19.8) (14.7)
Exercise of
share options - 1.0 - - (0.2) - 0.2 1.0 -
Equity settled
share based payments - - - - 0.8 - - 0.8 0.5
At 31 August 3.3 27.5 25.2 (0.8) 2.3 1.0 235.1 293.6 186.1
2006
*the opening and closing capital reserve includes a capital redemption reserve
of €0.3m.
7. Dividend
An interim dividend of 12 cent per share is proposed on 326,820,046 ordinary
shares amounting to €39.2m.
This information is provided by RNS
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