C&C Group plc, which manufactures, markets and distributes branded beer, cider, wine, spirits and soft drinks across the UK and Ireland, has announced results for the twelve months ended 28 February 2021. The group has also announced a Rights Issue to raise approximately £151m.
Financial summary
Net revenue of €736.9m has decreased 56.1% versus last year, delivering an operating loss of €59.6m as a direct result of the impact of COVID-19. Net revenue growth of 14.2% in off-trade in FY2021 versus last year.
Operational highlights
The Group returned to profitability and underlying cash generation during the easing of on-trade restrictions in July, August and September 2020, demonstrating the operating leverage in the business to on-trade reopening.
The brand strength was reflected in off-trade volume share growth in FY2021 for Tennent’s, Bulmers and Magners with all three brands delivering share gains.
Addressing the growing consumer demand for ‘no and low’ alcohol alternatives: launching Tennent’s Zero and Tennent’s Light brand extensions and our own hard seltzer brands in Ireland and Scotland.
Since the Brexit transition period formally ended on 31 December 2020, we have to date had minimal disruption to our operations and supply chain.
Response to COVID-19
Proactive steps were taken to mitigate, where possible, the negative financial and operational impacts of the COVID-19 pandemic.
The group responded quickly and decisively to ensure it provided a safe and compliant workspace for its essential employees unable to work from home and a supportive working environment for all the team. It took up the government support initiatives including the furlough scheme to support 2,000 colleagues' jobs.
The firm supported customers with various initiatives; picking up excess stock; replacing old kegs for new; credit terms and loan moratoriums; order and delivery options, ranging advice and promotions for the reopening of the hospitality sector.
It implemented a cost streamlining programme to deliver annualised savings of €18m against the pre COVID-19 cost base, which includes consolidation of the distribution network.
Strategic developments
There are new exclusive distribution deals in FY2021: Budweiser in Ireland; Tito’s Handmade Vodka in the UK, the #1 selling spirit brand in the USA; and Innis & Gunn, Scotland’s #1 craft beer, into the IFT (‘Independent Free Trade’) across the on-trade in the UK and Ireland.
As part of the Innis & Gunn deal, C&C secured a long-term production contract for our Wellpark Brewery and received an 8% equity stake along with a long-term incentive scheme which will make a number of shares available to the Group based on performance targets.
It has optimised of the Great Britain, Matthew Clark and Bibendum on-trade distribution networks to drive ongoing efficiencies and enhanced future margins.
The pandemic has accelerated the adoption of technology and the group has responded to this by continuing the development of its ecommerce platforms, creating new features to further enhance customers' journey.
The non-core asset disposal programme continued: Tipperary Water Cooler business in October 2020 for €7.4m, and the Vermont Hard Cider Company in April 2021 for $20m.
Current trading environment
With outdoor as well as restricted indoor hospitality once again reopened in the UK, C&C has been able to respond quickly to rapidly evolving demand with outlets traded with for the week ending 16 May 2021 at 65% of the same week in 2019. In addition, Irish hospitality is due to reopen from early June 2021.
The firm has completed the consolidation of the on-trade distribution network, moving all of our English distribution in house. In addition, a new 50,000 square foot Edinburgh depot was opened in May 2021 and has resulted in the subsequent closure of 4 depots in the existing Scotland network.
The company communicated an IT security incident on 19 April 2021 which was isolated within our Matthew Clark and Bibendum business. The incident has emphasised the need for continued focus on information security and the group has commenced a detailed review of its information security and cyber preparedness policies and processes.
CEO David Forde commented, “FY2021 has presented an extraordinary set of circumstances which have challenged our business, and our industry, at every level. With approximately 80% of C&C’s pre COVID-19 net revenue derived from the hospitality sector, the pandemic has had an unprecedented impact on the Group.
'Thanks to the prompt and decisive action of our team and our resilient business model, we have successfully navigated these challenges to date. We implemented responses to the near-term challenges to maximise liquidity, support customers, reduce costs and fulfil off-trade demand from the immediate change in consumption dynamics.
'Our top priority continues to be protecting all our stakeholders. Their health and wellbeing are of paramount importance to the success of C&C. As the hospitality sector recovers from COVID-19, we will continue to be flexible in our approach and work with our customers who will face challenges as trade reopens and support them through collaboration with our suppliers and partners.'
Forde continued, 'Our business model was proven during FY2021 as, during the periods of on-trade restrictions easing, we returned to profit and cash generation. C&C’s brand strength was demonstrated by our core brands growing off-trade share, reflecting their special relationship to the consumers they serve. We will build on this as the hospitality sector reopens, targeting cider share growth and building our share in premium beer which we continue to see as a significant market opportunity.
'Development and evolution of our branded portfolio will remain key for growth and we will enhance our wider portfolio with new agencies or equity for growth brands. We will continue to optimise our system strength through cost streamlining and infrastructure consolidation, in addition to accelerating the adoption of technology and the efficiencies therein.
'We believe our brand and system strength will position us to grow market share, which will be delivered by engaged and inspired colleagues, committed to our sustainability agenda.
'We are confident in our business model and strategy for growth, the Group continues to face uncertainty with the ongoing impact of COVID-19 across the hospitality sector. Today we have also announced a Rights Issue to raise gross proceeds of approximately £151 million which will strengthen the balance sheet and ensure C&C is in a stronger position to achieve sustained growth and pursue its strategy as the hospitality sector emerges from the pandemic.'
Forde finished, 'We look to FY2022 with optimism and C&C continuing to play an integral role in the UK and Ireland drinks market with our brand and distribution assets appreciated by consumers, customers and brand owners alike.
'We are confident C&C will emerge from the pandemic stronger, more streamlined, and primed to deliver on our ambition to be the preeminent brand-led, final-mile, drinks distributor across our core markets which will ensure long term value for our shareholders.”