C&C Group reports fiscal H1 adjusted EBITDA of €70.9M, up 132.5% from year-ago period, with operating profit rising 254.2% to €54.9M; net revenue rises 35.6% to €903M

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LONDON and DUBLIN , October 27, 2022 (press release) –

RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2022

C&C Group plc ('C&C' or the 'Group'), a leading, vertically integrated premium drinks company which manufactures, markets and distributes branded beer, cider, wine, spirits and soft drinks across the UK and Ireland announces unaudited results for the six months ended 31 August 2022 ('H1 FY2023').

H1 FY2023 FINANCIAL OVERVIEW

 

H1 FY2023

H1 FY2022

Change

       

€'m except per share items

€'m

€'m

%

Net revenue(i)

903.0

666.1

35.6%

Adjusted EBITDA(i)(ii)

70.9

30.5

132.5%

Operating profit(i)(iii)

54.9

15.5

254.2%

Operating margin(iii)

6.1%

2.3%

3.8%pts

Basic EPS(iv)

9.6c

2.5c

284.0%

Adjusted diluted EPS(iv)

9.5c

1.6c

493.8%

Exceptional (charge)/credit (pre-tax)

(0.3)

3.4

(108.8%)

Dividend per share (cent)

-

-

 

Free cash flow(iii)(v)

55.3

26.2

110.7%

Free cash flow(iii)(v)(% conversion)

78.0%

85.1%

(7.1%)pts

Net Debt(vi)

179.7

245.8

(26.7%)

Net Debt(vi)(excluding lease liabilities)

104.5

175.2

(40.4%)

FINANCIAL HIGHLIGHTS

  • Net revenue increased 35.6%(i)year-on-year to €903.0m, driven by volume growth of +11% and price/mix growth of +25%.
  • Operating profit of €54.9m(iii)(€15.5m(i)H1 FY2022) delivered an operating margin of 6.1% (H1 FY2022: 2.3%).
  • C&C's inherent cash generating capability has resulted in a free cash inflow(v)of €55.3m pre-exceptional and a related free cash flow conversion of 78.0%. This performance includes a non-recurring repayment of €16.1m for tax deferrals.
  • Net debt to adjusted EBITDA (12 month trailing) of 1.5x, a significant improvement from 3.4x reported in February 2022 .
  • Reduction in leverage multiple reflects the sale of the Group's interest in Admiral Taverns, combined with solid underlying performance of the business and strong cash flow generation. The Group has now exited covenant waivers.
  • Significant adjusted diluted EPS growth to 9.5c in H1 FY2023 compared with 1.6c in H1 FY2022. Basic EPS was 9.6c.
  • The Board intends to recommence a full and final year dividend following the release of the full year FY2023 results.

STRATEGIC & OPERATING HIGHLIGHTS

  • Distribution operating margin of 4.2% for H1 FY2023, in line with the target outlined at our Capital Markets Day in May.
  • Marketing investment increased as planned to 11.1% of branded net revenue from 7.5%(i)in H1 FY2022 and 5.2%(i)in H1 FY2020.
  • Bulmers has grown Moving Annual Total ('MAT') volume and value share(ix),(x).
  • Our premium beer portfolio reporting volume growth and volume share growth(vii),(viii),(ix),(x).
  • The Group has grown its revenue share of the customer with revenue per outlet in double digit growth compared to H1 FY2022 and the same period preCOVID-19.
  • Group branded operating margins are broadly in lineyear-on-year, with volume, price/mix growth and price actions being offset by increased marketing investment, inflationary impact on cost base and manufacturing input costs.
  • Customer service levels have continued to improve with H1 FY2023 average On Time In Full (' OTIF ') for Matthew Clark and Bibendum of 87% compared to 76% for H1 FY2022.

C&C Group plc | Six months to 31 August 2022

Page 1

ESG & SUSTAINABILITY HIGHLIGHTS

  • Progress with the Group's ESG and sustainability initiatives, including:
  1. Launch of a community partnership with the Big Issue Group , athree-year partnership, focused on mentoring,

skills and access to employment opportunities to support people living in poverty.

  1. Continued focus on reducing carbon, the Group is on track to deliver Scope 1 and 2 emissions targets in FY2023.
    • Progress being made on heat recovery systems at both manufacturing sites, saving energy, in addition to reducing carbon.
    • In Clonmel work commenced on a heat pump, which will be operational in FY2024 and reduce the site's gas consumption by 40% and CO2 emissions by 1,800 tonnes per annum.

CURRENT TRADING & OUTLOOK

  • Macro-economicand consumer environment remains difficult with net revenues for September 2022 -5% compared to the same period in 2021.
  • The Board intends to recommence a full and final year dividend following the release of the full year FY2023 results.
  • Ournear-term trading focus is on ensuring the highest standards of service and stock availability to our customers and consumers as we prepare for the first unrestricted Christmas trading period for three years and the upcoming FIFA World Cup.

David Forde , C&C Group Chief Executive Officer:

"We are pleased with the Group's resilient and progressed H1 performance, where - despite the challenging economic backdrop - we have delivered significant revenue and operating profit growth. Encouragingly, our profit growth has been coupled with margin expansion as the business returns to a more normalised product/price and channel mix. We are delivering on a number of key priorities outlined at our recent Capital Markets Day; achieving our guided medium-term targets for distribution margins and target leverage. Further, we increased brand investment, grew our share of premium beer, increased revenue per customer, grew our agency brands and also implemented a number of our sustainability initiatives.

FY2023 H2 will provide our first unrestricted Christmas trading period for three years, in addition to the upcoming FIFA World Cup, therefore our focus is on ensuring the highest standards of service and stock availability over this period and beyond. However, despite these positive tailwinds, the outlook for H2 is challenging with inflationary pressures on our own margins as well as those of our customers, and the cost of living pressures on the consumer environment in the near-term.

The Group's priority continues to be on executing our strategy; enhancing efficiencies to insulate the business from inflationary pressures where possible whilst progressing our sustainability ambitions. This coupled with the strength of the C&C model and its combination of brand power and unique last mile distribution, alongside its robust balance sheet, puts the Group in a position of relative competitive strength."

ENDS

C&C Group plc | Six months to 31 August 2022

Page 2

OPERATING REVIEW

Great Britain

€'m

     

Constant currency(i)

H1 FY2023

H1 FY2022

Change %

       

Net revenue

752.3

550.6

36.6%

of which Branded

107.1

89.6

19.5%

- Price / mix impact

   

17.4%

- Volume impact

   

2.1%

of which Distribution

631.8

442.3

42.8%

- Price / mix impact

   

24.0%

- Volume impact

   

18.8%

of which Co-pack / Other

13.4

18.7

(28.3%)

Operating profit/(loss)(iii)

35.9

7.2

398.6%

Operating margin

4.8%

1.3%

3.5%pts

of which Branded

10.7

12.2

(12.3%)

of which Distribution

25.2

(5.0)

NM

Volume - (kHL)

2,386

2,141

11.4%

of which Tennent's

495

455

8.8%

of which Magners

320

347

(7.8%)

       

Our Great Britain division delivered €752.3m of net revenue in H1 FY2023, an increase of 36.6% compared to H1 FY2022, driven by, strong growth in our distribution volumes and a full six months of unrestricted trading. As a result, operating profit increased to €35.9m, compared with €7.2m in H1 FY2022, driven by volume and pricing growth alongside a better channel mix, which delivered operating margin of 4.8% compared with 1.3% in H1 FY2022. We have also seen an as expected rebalancing of the on-trade/off-trade channel split which is now broadly in line with pre COVID-19 levels. Despite a slowdown in on-trade momentum over Q2 FY2023, consistent with the wider market and reflecting of the impact of inflation on discretionary consumer spending, the trend has not been linear with performance in August better than July.

The improvements to our model and a more normalised trading environment have allowed us to deliver increased distribution margins have increased and are now in line with medium-term guided targets, branded margins reflect €6.6m of increased marketing investment in H1 FY2023 and continuing cost pressures, particularly in manufacturing overheads. The division has navigated a challenging market backdrop and continued to progress our One C&C GB integration and optimisation strategy.

Operational Summary

We are pleased to report that Matthew Clark and Bibendum OTIF, one of our key delivery metrics, has continued to improve with 87% on average for H1 FY2023 compared to 76% for the same period in FY2022. CSI (Customer Service Index) and NPS ( Net Promotor Score ) scores across our Tennent's, Matthew Clark and Bibendum business have also continued to improve over H1 FY2023. Together these metrics reflect our market leading service and ability to meet the evolving needs of our customers.

We continue to grow the level of business we conduct through our market leading ecommerce platforms. In August 2022 , 78% of our IFT on-trade revenues were ordered online, with the business well on track to achieve its near-term target of

C&C Group plc | Six months to 31 August 2022

Page 3

80% of Independent Free Trade ('IFT') revenue fulfilled through ecommerce. We continue to see higher order values online compared with traditional contact centre orders, with orders on average 15.5% higher.

Wellpark, our Glasgow based manufacturing facility, has had to navigate a challenging inflationary environment with aluminium and energy costs continuing to be the key areas where we are seeing inflationary pressures. Alongside our sustainability initiatives which are on track to deliver the Group's carbon reduction plans for FY2023, we have focused activity on maximising energy efficiency, reducing both our site usage and overall carbon footprint. Wellpark has also retained its British Retail Consortium AA grade, the highest level of food safety standards in the UK .

Brands

Tennent's volumes have grown 8.8% vs H1 FY2022, benefitting from the reopening of the on-trade, with on-trade Tennent's volumes +53%. The investment behind the brand continues to drive positive brand health scores, with Tennent's Lager brand index score reaching 17.8(xi), its highest ever in July 2022 . In the on-trade channel, the brand has lost share of beer with MAT volume share decreasing by 2.1%pts to 35.8%(xii), share losses have in part been driven by competitor supply chain challenges in 2021 improving. In the off-trade channel, MAT beer volume share of 23.0% has declined compared with H1 FY2022 (24.3%)(vii), in the near-term, share losses have narrowed in the latest three month data(vii). The off-trade we have been impacted by continuing premiumisation, as well as several competitor brand launches and format expansions into the off-trade. Despite the share losses, Tennent's volume sales, outsell the two closest competitors by

20%(xiii).

Cider's share of Long Alcoholic Drinks ('LAD') volume has declined 1.1%pts year-on-year. With Magners, we have lost overall volume share of GB cider, in the off-trade Magners MAT volume share of GB cider decreased by 0.5%pts(vii)and reduced by 0.2%pts in the on-trade(viii). We are pleased to report the latest four and twelve week off-trade data, Magners is in volume and value growth, with brand volume share growth of 11.0% and 4.6% in the latest four and twelve week data respectively(vii). We have continued to grow outlet penetration of Magners in the IFT, with this growing from 33% in H1 FY2022 to 35% in H1 FY2023.

Our premium beer brands, saw significant year-on-year growth in H1 FY2023, albeit from a low base, driven by no restrictions in the hospitality sector. We delivered 48% on-trade volume growth for Heverlee and Menabrea. Our Menabrea and Heverlee brands alongside our agency and equity for growth premium beer brands, namely Innis & Gunn , Drygate and Jubel, have continued to grow both volume and penetration within our IFT account base, with volumes +82% compared H1 FY2022. Heverlee's brand awareness continues to grow and the brand is now the fifth Premium Lager brand by value in Scotland (xi). In addition, Menabrea has won a number of national listings and the brand has delivered its first above the line media campaign - reaching a third of UK adults.

Distribution

H1 FY2023 volumes have seen a strong start to the year, growing 19% compared with H1 FY2022, with corresponding net revenues +43% on the same basis. We continue to execute our strategy, driving efficiencies into our system through network optimisation; minimum order values and growing our revenues per customer through incremental volumes and categories. As a result, we are pleased to report that distribution margins have grown to 4.0% from 2.3% in H1 in FY2020.

International

International volumes are down 7.2% compared with the same period in H1 FY2022, however, on a like-for-like basis (excluding the divested Vermont Hard Cider Company ), volumes are broadly flat. Magners continues to be our main export brand, contributing over 70% of the total international volume. EMEA remains our strongest performing territory with Spain the strongest performing market, aided in part by a strong retuof tourism.

C&C Group plc | Six months to 31 August 2022

Page 4

Ireland

€m

     

Constant currency(i)

H1 FY2023

H1 FY2022

Change %

       

Net revenue

150.7

115.5

30.5%

of which Branded

58.7

39.7

47.9%

- Price / mix impact

   

38.1%

- Volume impact

   

9.8%

of which Distribution

90.8

71.7

26.6%

- Price / mix impact

   

20.7%

- Volume impact

   

5.9%

of which Co-pack / Other

1.2

4.1

(70.7%)

Operating profit(iii)

19.0

8.3

128.9%

Operating margin

12.6%

7.2%

5.4%pts

of which Branded

14.0

7.1

97.2%

of which Distribution

5.0

1.2

316.7%

Volume - (kHL)

800

741

8.0%

of which Bulmers

204

184

10.9%

       

Our Ireland division's net revenue increased by 30.5%(i)to €150.7m in H1 FY2023, driven by the re-opening of the on- trade. Ireland's operating profit increased by 128.9% to €19.0m with margins growing to 12.6% from 7.2% last year. A better channel mix as a consequence of the removal of trade restrictions, alongside the introduction of Minimum Unit Pricing ('MUP') has helped in improving margins year-on-year despite inflationary cost pressures being faced by the business. Branded operating margins have grown to 23.9% in H1 FY2023 from 17.9% in H1 FY2022. Margins reflect increased marketing investment (48% higher year-on-year) and cost pressure particularly, manufacturing input costs. Distribution margins have grown to 5.5% in H1 FY2023 from 1.7% last year.

Operational Summary

With customer service being core to the success of our brand-led distribution model, we are pleased to note that the average OTIF for H1 FY2023 has improved compared with the same period in H1 FY2022, with August 22 OTIF of 97.5% compared to 94.6% in August 21 . This has been key in delivering the revenue and profit growth we have reported.

In January 2022 , the Republic of Ireland introduced MUP, we are pleased to report that in the latest MAT volume share data that our Bulmers brand has performed resiliently and increased market share in the off-trade(ix). We believe this is a reflection of the strength of the brand, its special affinity with Irish consumers and the work undertaken to optimise its position before the introduction of MUP.

We are pleased to report that the revenue being captured online through our ecommerce platform was 71% of total revenue in August 2022 compared with 66% in February 2022 . We continue to see higher order values online compared with traditional contact centre orders, with orders on average 15% higher.

Building on the work undertaken in FY2022 to reduce our Clonmel manufacturing site's energy usage, in H1 FY2023 we commenced work to install a heat pump at the site. The pump should be operational in FY2024 and will reduce the site's gas consumption by 40% and reduce our CO2 emissions by 1,800 tonnes per annum. This is another example of a capital investment project being implemented to insulate the business from cost pressures, ensuring security of supply and meeting our sustainability ambitions.

C&C Group plc | Six months to 31 August 2022

Page 5

Disclaimer

C&C Group plc published this content on 27 October 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 October 2022 07:46:23 UTC .

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