Final Results
C&C Group Plc
09 May 2008
C&C GROUP PLC
ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED TO
29 FEBRUARY 2008
Dublin, London, 9 May, 2008: 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 results for the year ended 29 February 2008.
Financial Review
• Revenue for the period was €679.0 million - a decline of 8.1%.
• Operating Profit before exceptional items was €125.2 million - a decline
of 37.3%.
• Adjusted basic EPS(i) was 32.2 cent - a decline of 41.4%
• Final proposed dividend of 15 cent per share; total dividend of 27 cent
per share - unchanged from the prior year.
• Purchased and cancelled 5.4% of the Group's shares at a cost of €139.9
million.
• Net debt(ii) reduced by €49.2 million to €256.2 million - 1.7 times
EBITDA.
Business Review
• Cider sales volumes declined by 11%.
• Tullamore Dew sales volumes increased by 22%.
• Marketing investment in the Cider division increased by 41% to €68
million.
• Cider capacity expansion programme completed.
• Launched a series of measures to improve Cider division performance.
- Streamlined organisation structure;
- Creation of two senior positions - Managing Director Magners GB and
Managing Director Supply Chain;
- €10 million annual cost reduction programme underway;
- Magners Draught will be launched in Great Britain later this month;
- Further investment in Magners trade marketing to enhance brand
presence and distribution in Great Britain.
• Commenced market test of Magners in Spain and Germany.
• Completed the disposal of the Group's Soft Drinks business to Britvic plc
for €246.6 million.
Maurice Pratt, C&C Group Chief Executive Officer commented, "In 2008/09 we
expect to stabilise the Group's financial and market performance, and, to
deliver growth through the benefits of a streamlined organisation; cost
reduction programme; and a series of marketing initiatives."
(i) Adjusted basic EPS excludes exceptional items.
(ii) Excludes the fair value of SWAP instruments.
Investors and analysts Irish Media International Media
Mark Kenny/Jonathan Neilan Paddy Hughes or Edward Orlebar or
K Capital Source Anne-Marie Curran Charlotte Kirkham
Tel: +353 1 631 5500 M Communications
Email: c&cgroup@kcapitalsource.com Drury Communications Tel: +44 207 153 1523/1531
Tel: +353 1 260 5000 Email: orlebar@mcomgroup.com
Email: phughes@drurycom.com
Results for the year ended 29 February 2008
C&C is reporting Operating Profit of €109.6 million and basic earnings per share
of 73.1 cent.
Operating Profit before Exceptional Items is €125.2 million, and adjusted basic
earnings per share (i) is 32.2 cents.
The decline in Operating Profit before Exceptional Items of 37.3% in the period
reflects a decline in sales volumes in the Group's Cider division; increased
marketing investment; and the costs associated with increased cider
manufacturing capacity. Sales volumes for the period principally reflect C&C's
loss of share within the premium cider category in Great Britain and weak demand
due to poor summer weather in both Great Britain and Ireland.
Free Cash Flow (FCF)(ii) in the period fell from €71.1 million to €32.0 million.
This drop reflects the decline in Operating Profit and an increase in net
capital expenditure, partially offset by a reduction in working capital.
Exceptional Items
Exceptional items in the year amount to a credit, after tax, of €131.6 million.
This comprised:-
Disposal of Soft Drinks
On 29 August 2007, the Group completed the disposal of its Soft Drinks division
and related assets to Britvic plc, for a consideration of €246.6 million. This
gave rise to an exceptional gain in the period of €137.4 million.
Reorganisation and Cost Reduction Programme
In November 2007, the Group announced a reorganisation and cost reduction
programme with the objectives of realigning the cost structure with the sales
volumes base and streamlining the Group's organisation structure. This involved
a head count reduction of 150 people across the Group with an estimated once off
cost of €15.6 million before taxation.
Foreign Exchange Gain
A shortfall in expected Sterling revenues resulted in surplus Sterling forward
contracts for 2007 and 2008, which were effectively cancelled during the
financial year, giving rise to a gain of €9.1 million.
Shareholders Returns
Subject to shareholder approval, the proposed final dividend of 15 cent per
share will be paid on 16 July 2008 to ordinary shareholders registered at the
close of business on 23 May 2008. This dividend is subject to Irish Dividend
Withholding tax (where applicable). The Group's full year dividend will
therefore amount to 27 cent per share, which is unchanged on the prior year. A
scrip dividend alternative will be available. The dividend payout represents 84%
of Net Profit before Exceptional Items.
The Group invested €139.9 million in an on-market share buyback programme during
the course of the year. The company purchased 17.7 million shares at an average
price of €7.84. All shares acquired have been cancelled. The number of shares in
issue at 29 February 2008 was 313 million.
(i) Adjusted basic earnings per share excludes exceptional items.
(ii) Computation of Free Cash Flow is detailed below.
Business improvement
Following the decline in Cider sales volumes in the second quarter of the year,
C&C carried out a review of its organisation structure, cost base and Great
Britain marketing strategy.
This review resulted in the following initiatives which have been, or are in the
course of being, implemented.
Organisation Structure
The Group has integrated its Head Office and Cider division management
structures and created an organisation based on a supply and demand business
model. This process resulted in the creation of two senior appointments -
Managing Director, Magners - Great Britain and Managing Director, Supply Chain.
Cost Reduction
The cost reduction plan, announced in November 2007, had the objective of
re-aligning the Group's cost structure to the sales volume base and realising
savings associated with a more streamlined organisation structure. This
programme involved a headcount reduction of 150 people across the Group and is
expected to deliver cost reductions (net of raw material cost inflation) of €10
million in a full year. The programme was substantially completed at 29 February
2008.
GB Market
John Holberry (formerly of Coors Brewers Limited) took up his appointment as
Managing Director Magners - Great Britain on 18 March 2008.
In addition to the creation of this position, the Group's sales and marketing
resources in Great Britain are being strengthened to address the challenges of a
competitive market.
C&C plans to launch draught Magners in Great Britain later this month and has
entered into a long-term agreement with Coors Brewers for distribution of
draught Magners in Great Britain.
C&C has also launched Magners Light, a low calorie version of Magners Original
Irish Cider, in Great Britain and has extended its range of SKU's available to
the Off Trade.
Marketing Strategy
While maintaining the strategy of driving growth in Great Britain through
significant investment in consumer media advertising, C&C, is allocating
increased resources to trade marketing in 2008/09 to enhance Magners brand
presence and distribution.
Outlook
C&C's strategy is to drive growth of Magners sales volumes in Great Britain
through a combination of a high level of consumer advertising and increased
trade marketing investment. On the basis of normal summer weather, the Group
expects the premium cider category in Great Britain to return to growth in 2008.
C&C plans to continue its market tests for Magners in Barcelona and Munich in
2008/09. Execution of the tests have been modified to apply the findings from
the 2007/08 tests.
In the 2008/9 year to date, performance in both Ireland and Great Britain
reflects weak market conditions related to the combination of low consumer
confidence and poor spring weather. Revenue growth is expected from the second
quarter onwards as marketing initiatives in Great Britain become effective and
as comparisons track a weak year ago.
For the full year the Group expects modest overall revenue growth and some
improvement in operating margins.
Foreign exchange hedging is expected to substantially insulate C&C in 2008/09
from the adverse effect of the deterioration in the Sterling/Euro exchange rate.
With a low level of capital expenditure, Free Cash Flow should improve
significantly in 2008/09.
OPERATIONS REVIEW
Summary
Revenue and Operating Profit(i) for the year ended 29 February 2008 declined by
8.1% and 37.3% respectively. At constant currency exchange rates(ii) the
declines were slightly lower at 6.9% and 36.6% respectively.
This performance reflects a decline in the Cider division, primarily as a result
of the loss of market share by Magners in Great Britain; the impact of poor
summer weather in Ireland and Great Britain; and an increase in operating costs
and marketing investment.
Operating margins in the Cider division fell by 11.7 percentage points and by
4.3 percentage points in the Spirits & Liqueurs division.
Summary Group Income Statement (before exceptional items) (i)
Year ended Year ended Year ended
28 February 2007 (i) 28 February 2007
29 February 2008 Constant Currency
Revenue €m 679.0 738.5 729.4
Growth % (8.1) (6.9)
Operating Profit (i) €m 125.2 199.6 197.4
Growth % (37.3) (36.6)
Operating Profit Margin % 18.4 27.0 27.1
Net Finance Charges €m (14.8) (14.4)
Taxation €m (11.9) (20.9)
Discontinued Operations €m 4.8 14.9
Net Profit before €m 103.3 179.2
Exceptional Items.
Growth % (42.3%)
Net Profit before Exceptional Items fell by 42.3% in the year. In addition to
the decline in Operating Profit from continuing operations; this also reflects
the reduction in contribution from discontinued operations following the
disposal of the Soft Drinks division in August 2007.
The effective tax rate for continuing operations was 10.8% in the period
compared to 11.3% in the year ended 28 February 2007.
(i) Continuing operations before exceptional items.
(ii) Constant currency calculation is set out below.
DIVISIONAL REVIEW - CIDER
Year ended Year ended Year ended Growth
29 February 2008 28 February 2007 28 February 2007 Year-on-Year
€m €m (constant currency) (constant
(i) currency)
€m %
Revenue 470.5 517.9 512.5 (8.2)
Operating Profit 107.5 178.9 177.7 (39.5)
Operating Margin % 22.8 34.5 34.7
Revenue for the Cider division of €470.5 million represents a decline of 8.2% on
2007 and reflects an 11% decline in sales volumes. Operating Profit decreased by
39.5% to €107.5 million against €177.7 million in 2007. Operating margin, at
22.8%, decreased by 11.9 percentage points year-on-year.
Volumes for the Group's international cider brand, Magners, declined by 15% in
the year ended 29 February 2008 and volumes for the Group's Irish cider brand
Bulmers declined by 4%.
In Great Britain, which is Magners' principal market, the over-all On Trade LAD
(ii) market declined by 6.7% in the 12 month period to January 2008 and Magners'
MAT(iv) share declined from 1.7 to 1.6%
Packaged cider's share of total cider (On Trade) increased slightly in the 12
months ended January 2008 from 29.9% to 31.1%; this comprises an increase in
share in the 6 months ended August 2007 to 32.2% and a decrease in the 5 months
to January 08 to 30.3%.
Magners' share of the packaged cider category declined in the 12 months ended 31
January 2008 from 78.9% to 64.3% as a result of heavy price-led competition.
Magners' share in the 5 months to January 2008 was 58.8%.
Magners has had a strong performance in the Great Britain Off Trade market where
its share of cider increased from 5.9% to 8.1% in the 12 months to 23 February
2008.
In the Republic of Ireland, the overall beer/cider market declined by 4.5% (v)
in the year ended 29 February 2008. Bulmers' MAT market share increased
slightly from 10.5% to 10.6 % in the period.
During the year, C&C commenced a market test to assess the prospects for Magners
cider in Spain (Barcelona) and Germany (Munich). The tests yielded a range of
insights and it is planned to continue with the tests in 2008/09 in both
markets.
The decline in operating margins reflects the weak volume performance combined
with substantially higher manufacturing costs and marketing investment.
Manufacturing cost increases were predominantly associated with the increase in
production capacity. Marketing investment increased by 41% with increases in
Great Britain, Ireland and additional costs associated with the European test
markets.
(i) Constant currency calculation is set out below
(ii) LAD refers to Long Alcohol Drinks
(iii) Market statistics are per Nielsen unless otherwise stated
(iv) MAT refers to Moving Annual Total
(v) Source: C&C/Revenue Commissioners February 08
DIVISIONAL REVIEW - SPIRITS & LIQUEURS
Year ended Year ended Year ended Growth
29 February 2008 28 February 2007 28 February 2007 Year-on-Year
€m €m (constant (constant
currency) (i) currency)
€m %
Revenue 87.5 79.1 77.9 12.3
Operating Profit 15.8 17.7 16.7 (5.4)
Operating Margin % 18.1 22.4 21.4
Revenue for the Spirits & Liqueurs division of €87.5 million represents an 12.3%
increase on 2007 levels. Operating Profit decreased by 5.4% to €15.8 million in
comparison with €16.7 million in 2007. Operating margin, at 18.1%, decreased by
3.3 percentage points year-on-year.
Overall volume shipments increased 4% in the period. It is estimated that
depletions(ii) growth in the period was approximately 5%.
C&C's premium Irish whiskey brand Tullamore Dew performed particularly well with
shipment growth of 22% and depletions growth of 19% in the year. Volume gains
were achieved across a wide number of markets in Europe and in the US.
Shipments of C&C's Irish cream liqueur brand, Carolans, decreased by 7% and
depletions declined by 4% . The main shortfall arose in the US and was a result
of a price increase ahead of competitors early in the year.
The decrease in operating margin reflects a substantially higher investment in
marketing costs and an increase in input costs (cream) for Carolans. Investment
in marketing for the division increased by 27% in the period, principally in
support of Tullamore Dew. This investment is expected to enhance the brand's
long term growth prospects.
(i) Constant currency calculation is set out on below
(ii) Depletions is defined as sales by distributors to customers
DIVISIONAL REVIEW - DISTRIBUTION
Year ended Year ended Year ended Growth
29 February 2008 28 February 2007 28 February 2007 Year-on-Year
€m €m (constant currency) (constant
(i) currency)
€m %
Revenue 121.0 141.5 139.1 (13.0)
Operating Profit 1.9 3.0 3.0 (36.7)
Operating Margin % 1.6% 2.1% 2.1%
Revenue for the Distribution division of €121.0 million represents a 13.0%
decline on 2007 levels. Operating Profit declined by 36.7% to €1.9 million
compared to €3.0 million in 2007.
Operating margin at 1.6% fell by 0.5 percentage points year-on-year.
The decline in Revenue and Operating Profit was mainly due to the loss of the
Foster wine portfolio agency.
(i) Constant currency calculation is set out below
FINANCE REVIEW
Cash Flow
Free Cash Flow of €32 million represents 21% of EBITDA(i) compared with 30% for
the year ended 28 February 2007. This decrease reflects the decline in Operating
Profit and an increase in net capital expenditure, partially offset by a
reduction in working capital.
A summary Cash Flow for the year ended 29 February 2008 is set out below:
Year ended Year ended
29 February 2008 28 February 2007
€m €m
Operating Profit (ii) 130.8 216.4
Depreciation 20.3 21.4
EBITDA (i) 151.1 237.8
Net Capital Expenditure (102.9) (79.4)
Working Capital 12.2 (47.3)
Other (1.9) (1.7)
58.5 109.4
Exceptional Items paid(iii) (4.7) -
Net Finance Charges paid (12.6) (13.9)
Taxation Payments (9.2) (24.4)
Free Cash Flow (FCF) before disposals 32.0 71.1
FCF/EBITDA 21% 30%
(i) EBITDA is before exceptional items
(ii) Operating Profit includes both continuing and discontinued
operations and excludes exceptional items
(iii) Comprises costs paid on the reorganisation programme and cash
received on settlement of a portion of the surplus Sterling forward
contracts.
Working Capital
The cash inflow from working capital comprises a €24.4 million inflow from
continuing operations and an €12.2 million outflow for discontinued operations.
The inflow from continuing operations reflects the reduced level of activity in
the year. The outcome includes a significant reduction in finished goods stocks
partially offset by an increase in the levels of apple juice stock.
Capital Expenditure
C&C's capital expenditure for 2007/08 was €102.9 million. This expenditure
included a €97 million investment in the expansion of cider manufacturing
capacity in Clonmel which came on stream in May 2007. Following the expansion,
the Group reviewed the expected useful life of production plant and machinery in
light of the high specification of equipment installed and the forecast
utilisation levels. The useful economic life of the majority of the plant was
increased from 10 to 13 years and the economic life of storage tanks was
increased from 20 to 30 years. The effect of these changes was a reduction in
the depreciation expense of €2 million.
Finance Charges
The interest rate payable on debt averaged 4% for the year, which was in line
with the average rate for year ended 28 February 2007.
Future interest rate exposure is partially hedged at the following interest
rates (excluding margin):
Fiscal year 2009 €150 million hedged at 3.6%
Fiscal year 2010 €150 million hedged at 3.6%
Fiscal year 2011 €100 million hedged at 4.0%
Fiscal year 2012 € 50 million hedged at 4.6%
Net Debt (i)
Net debt at 29 February 2008 was €256.2 million, which was €49.2 million lower
than at the beginning of the year. The movement in net debt is set out below. At
February 2008, net debt to EBITDA (ii) was 1.7 times, compared to 1.3 times at
February, 2007.
€m
Net Debt at 1 March 2007 305.4
Free Cash Flow in period (32.0)
Dividends Paid 81.1
Own Shares acquired 139.9
Net proceeds from disposal of Soft Drinks (236.5)
Other (1.7)
Net Debt at 29 February 2008 256.2
(i) Excluding the fair value of SWAP instruments
(ii) EBITDA is before exceptional items
Foreign Exchange
The principal foreign currency forward contracts in place at 29 February 2008
can be summarised as follows:-
2009 2010
Stg £: Amount (m) 112.0 36.0
Average fwd Rate (Euro:Stg) 0.69 0.73
US $: Amount (m) 24.0 -
Average fwd Rate (Euro:US$) 1.41 -
Pensions
Pension fund deficits, calculated in accordance with the relevant accounting
standards, amounted to €24.3 million at 29 February 2008, made up as follows:
€m
Deficit at 1 March 2007 51.5
Reduction on disposal of Soft Drinks (19.0)
Other movement during the years (5.3)
27.2
Deferred tax asset (2.9)
Net Deficit at 29 February 2008 24.3
Comparative reporting
Comparisons for Revenue and Operating Profit for each division in the Operations
Review are shown at constant exchange rates for transactions in relation to the
Spirits & Liqueurs and Cider divisions and for translation in relation to the
Group's sterling denominated subsidiaries by restating the prior year at 2007/08
effective rates. The comparative rates used are:
Translation Transaction
(Actual average rate) (Effective rate) (i)
2007/08 2006/07 2007/08 2006/07
Euro: Stg 0.70. 0.68 0.69 0.69
Euro: $ - - 1.31 1.26
The impact of restating currency is as follows:
FX FX Transaction
Previously Translation Year ended
Reported 28 Feb 2008
Year ended Constant currency
28 Feb 2007 comparative
€m €m €m €m
Revenue
Cider 517.9 (0.7) (4.7) 512.5
79.1 - (1.2) 77.9
Spirits & Liqueurs
Distribution 141.5 (2.4) - 139.1
Total 738.5 (3.1) (5.9) 729.5
Operating Profit - before exceptional items
Cider 178.9 - (1.2) 177.7
17.7 - (1.0) 16.7
Spirits & Liqueurs
Distribution 3.0 - - 3.0
Total 199.6 - (2.2) 197.4
Special note regarding forward-looking statements
The announcement includes forward-looking statements, including statements
concerning expectations about future financial performance, economic and market
conditions, etc. These statements are neither promises nor guarantees, but are
subject to risks and uncertainties that could cause actual results to differ
materially from those anticipated.
(i) The effective rate is after taking account of hedge contracts
Group condensed income statement
For the year ended 29 February 2008
Year ended 29 February 2008 Year ended 28 February 2007
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
€m €m €m €m €m €m
Revenue 679.0 - 679.0 738.5 - 738.5
Operating costs (553.8) (15.6) (569.4) (538.9) (8.3) (547.2)
Operating profit 125.2 (15.6) 109.6 199.6 (8.3) 191.3
Finance income 2.1 9.1 11.2 1.9 - 1.9
Finance expense (16.9) - (16.9) (16.3) - (16.3)
Profit before tax 110.4 (6.5) 103.9 185.2 (8.3) 176.9
Income tax expense (11.9) 0.7 (11.2) (20.9) - (20.9)
Profit from continuing
activities 98.5 (5.8) 92.7 164.3 (8.3) 156.0
Discontinued operations
Profit from discontinued
operations 4.8 137.4 142.2 14.9 37.3 52.2
Profit for the year
attributable to equity
shareholders 103.3 131.6 234.9 179.2 29.0 208.2
Basic earnings per share (cent) 73.1c 63.8c
Diluted earnings per share (cent) 72.6c 62.9c
Continuing operations
Basic earnings per share (cent) 28.9c 47.8c
Diluted earnings per share (cent) 28.6c 47.1c
Group condensed statement of recognised income and expense
For the year ended 29 February 2008
2008 2007
€m €m
Income and expense recognised directly within equity:
Exchange difference arising on the net investment in
foreign operations (1.8) 0.2
Foreign currency reserve recycled to the income statement
on disposal of foreign subsidiary (0.5) -
Net movement in cashflow hedge reserve 16.9 3.8
Deferred tax on cash flow hedges (1.9) (0.4)
Actuarial gain on defined benefit pension obligations 2.0 1.5
Deferred tax on defined benefit pension obligations (1.0) 0.5
Total income and expense recognised directly in equity 13.7 5.6
234.9 208.2
Profit for the year attributable to equity shareholders
Recognised income and expense for the year attributable
to equity shareholders 248.6 213.8
Group condensed balance sheet
As at 29 February 2008
2008 2007
€m €m
ASSETS
Non-current assets
Goodwill 394.7 426.9
Property, plant & equipment 227.1 212.4
Derivative financial assets 3.6 3.7
Deferred tax 2.9 8.7
628.3 651.7
Current assets
Inventories 78.8 97.8
Trade & other receivables 67.5 138.8
Derivative financial assets 25.7 2.3
Cash & cash equivalents 32.7 40.7
204.7 279.6
TOTAL ASSETS 833.0 931.3
EQUITY
Equity share capital 3.1 3.3
Share premium 44.9 32.8
Other reserves 43.5 33.1
Retained income 327.7 315.3
Total equity 419.2 384.5
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings 288.9 316.1
Derivative financial liabilities 1.3 -
Retirement benefit obligations 27.2 51.5
Provisions 12.7 1.3
Deferred tax 6.4 5.0
336.5 373.9
Current liabilities
Interest bearing loans & borrowings - 30.0
Derivative financial liabilities 0.6 4.2
Trade & other payables 69.8 132.5
Current tax liabilities 6.9 6.2
77.3 172.9
Total liabilities 413.8 546.8
TOTAL EQUITY & LIABILITIES 833.0 931.3
Group condensed cash flow statement
For year ended 29 February 2008
2008 2007
€m €m
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year attributable to equity shareholders 234.9 208.2
Finance income (11.2) (1.9)
Finance expense 16.9 16.3
Income tax expense 12.0 23.0
Depreciation of property, plant & equipment 20.3 21.4
Profit on disposal of property, plant & equipment - (4.6)
Profit on disposal of subsidiaries after tax (137.4) (32.9)
Goodwill impairment - 8.3
Charge for share-based employee benefits 1.2 4.3
Pension contributions paid less amount charged to income (2.8) (6.0)
statement
133.9 236.1
Increase in inventories (0.5) (43.5)
Decrease / (increase) in trade & other receivables 16.8 (31.4)
Increase in provisions 6.4 -
(Decrease)/increase in trade & other payables (2.8) 27.6
153.8 188.8
Interest received 2.3 1.9
Interest paid and similar costs (14.9) (15.8)
Settlement gain on derivative instruments 2.9 -
Income taxes paid (9.2) (24.4)
Net cash inflow from operating activities 134.9 150.5
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment (102.9) (93.4)
Sale of property, plant & equipment - 14.0
Proceeds on disposal of subsidiaries 236.5 59.8
Net cash inflow/(outflow) from investing activities 133.6 (19.6)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of share options 5.9 2.0
Bank loans repaid (598.0) (82.0)
New bank loans drawn down 540.0 -
Issue costs paid (1.3) -
Shares purchased under share buyback programme (139.9) -
Dividends paid (81.1) (54.7)
Net cash outflow from financing activities (274.4) (134.7)
Net decrease in cash & cash equivalents (5.9) (3.8)
Cash & cash equivalents at beginning of year 40.7 44.5
Translation adjustment (2.1) -
Cash & cash equivalents at end of year 32.7 40.7
NOTE TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation
The financial information included from Group condensed income statement to
Note 9 of this Preliminary results statement has been extracted from the Group
financial statements for the year ended 29 February 2008 and is presented in
euro millions to one decimal place. The financial information presented in this
report has been prepared in accordance with the Listing Rules of the Irish Stock
Exchange and the accounting policies that the Group have adopted for 2008 and
are consistent with those applied in the prior year.
2. Segmental Reporting
Segmental revenue and operating profit information is presented below in
respect of the Group's continuing business and geographical segments. Segmental
assets and liabilities as at each year end date are presented below for the full
group. The primary format, business segments, is based on the Group's management
and internal reporting structure and reflects the dominant source and nature of
risks and returns arising from the Group's business.
The Group analyses its business into three main segments as follows: -
(i) Cider
This segment includes all Group cider products, with Bulmers in the Republic of
Ireland and Magners in all other markets being the two main brands involved.
(ii) Spirits & liqueurs
This segment consists of four brands, viz. Tullamore Dew, Carolans Irish Cream,
Frangelico Liqueur and Irish Mist Liqueur, all of which are owned by the Group
and are marketed internationally.
(iii) Distribution
This segment consists of distribution of wine and spirits and agency products in
both the Republic of Ireland and Northern Ireland, and wholesaling to the
licensed trade in Northern Ireland.
The analysis by segment includes both items directly attributable to a segment
and those, including central overheads that can be allocated on a reasonable
basis. Unallocated items comprise mainly retirement benefit obligations,
interest bearing loans & borrowings, derivative financial assets/liabilities,
current tax, deferred tax and certain exceptional expense items.
Class of business analysis
2008 2007
Operating Operating
profit profit
Revenue Assets Liabilities Revenue Assets Liabilities
€m €m
€m €m €m €m €m €m
470.5 107.5 664.5 (55.4) 517.9 178.9 633.2 (68.2)
Cider
Spirits & liqueurs 87.5 15.8 74.1 (15.7) 79.1 17.7 72.2 (17.4)
Soft drinks - - - - 123.1 (31.6)
Distribution 121.0 1.9 29.5 (11.4) 141.5 3.0 47.4 (16.6)
Total before
exceptional items 679.0 125.2 768.1 (82.5) 738.5 199.6 875.9 (133.8)
Unallocated items:
Exceptional items - (15.6)* - - - (8.3)** - -
Deferred tax - - 2.9 (6.4) - - 8.7 (5.0)
Current tax - - - (6.9) - - - (6.2)
Derivative assets
/ (liabilities) - - 29.3 (1.9) - - 6.0 (4.2)
Retirement benefit
obligations - - - (27.2) - (51.5)
- -
Group net borrowings - - 32.7 (288.9) - - 40.7 (346.1)
679.0 109.6 833.0 (413.8) 738.5 191.3 931.3 (546.8)
* €10m of the exceptional costs is directly attributable to the Cider segment,
while a further €0.4m is directly attributable to the Spirits and liqueurs
segment. The balance is attributable to Group head office costs.
** The exceptional item in the prior year relates to the write-off of the €8.3m
carrying value of goodwill attributed to the distribution segment.
Geographical analysis of revenue, assets and liabilities by country of operation
2008 2007
Revenue Assets Liabilities Revenue Assets Liabilities
€m €m €m €m €m €m
Republic of Ireland 583.4 749.3 (70.8) 638.4 841.1 (121.1)
Rest of the world 95.6 18.8 (11.7) 100.1 34.8 (12.7)
Total before unallocated items 679.0 768.1 (82.5) 738.5 875.9 (133.8)
Geographical analysis of revenue by country of destination
2008 2007
€m €m
Republic of 245.5 268.2
Ireland
UK 336.4 381.6
Rest of Europe 54.0 45.6
North America 35.8 35.1
Rest of the world 7.3 8.0
Total 679.0 738.5
3 Exceptional items
2008 2007
€m €m
Reorganisation costs associated with Group restructuring 15.6 -
Gain on mark to market of derivative financial instruments (9.1) -
Profit on disposal of property, plant & equipment - (4.6)
Profit on disposal of subsidiary undertakings, net of tax (137.4) (32.9)
Impairment of goodwill - 8.3
Total (130.9) (29.2)
Allocated to discontinued operations 137.4 37.5
Total relating to continuing operations 6.5 8.3
(a) Reorganisation costs
In November 2007, the Group announced a reorganisation and cost reduction
programme with objectives of: reducing operating costs by realigning the cost
structure to the current sales volumes base; strengthening the GB commercial
team and streamlining the Group's organisational structure. This involved a head
count reduction in the region of 150 people across the Group. The programme
comprising severance and other employee related costs resulted in an exceptional
cost before taxation of €15.6 million.
(b) Gain on mark to market of derivative financial instruments
A shortfall in expected Sterling revenues resulted in surplus Sterling forward
contracts in 2007 and 2008 that were effectively cancelled during the financial
year giving rise to a gain of €9.1 million.
(c) Profit on disposal of property, plant & equipment
The profit on disposal of property, plant & equipment in the prior year related
to the disposal of property in the Snacks business.
(d) Profit on disposal of subsidiary
On 29 August 2007, the Group completed the disposal of its Soft Drinks division
to Britvic plc, for a consideration of €246.6 million realising a profit of
€137.4 million. During the prior year, the Group completed the disposal of its
Snacks division for a gross consideration of €62.3 million realising a profit
after tax of €32.9 million.
(e) Impairment of goodwill
The loss of distribution rights to the Fosters wine brands during the prior
financial year, coupled with weaker demand for premium wines, and a reduced
margin on Long Alcohol Drinks (LAD) agency brands resulted in an impairment of
goodwill in the Distribution segment and consequently the write off of €8.3
million of the carrying value of goodwill attributed to this division.
The taxation implication of the exceptional items is; a credit of €0.7million to
continuing activities in relation to both the gain on mark to market of the
derivative financial instruments and the reorganisation costs associated with
Group restructuring, and a charge of €4.5 million to discontinued operations in
relation to Capital Gains Tax charged on the transfer of brands to Britvic
Ireland Ltd on disposal of the soft drinks business, the reported profit on
disposal is net of this charge (2007: €0.2 million included as a charge within
discontinued operations).
4. Discontinued operations
On 15 August 2007, the Group received unconditional approval from the Irish
Competition Authority to sell its Soft Drinks business to Britvic plc, the
business was deemed to be 'held for sale' from this date. The sale was completed
on 29 August 2007. On 21 September 2006, the Group completed the disposal of its
Snacks business. In line with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, depreciation was not charged on these assets from the
date the assets were classified as 'held for sale' and the businesses' are
presented as discontinued operations for all periods presented and are shown
separately from continuing operations.
Results of discontinued operations
Date of Disposal 28 February 2007
€m €m
Revenue 130.8 270.7
Expenses (125.2) (253.9)
Exceptional items - 4.6
Results from discontinued operations before tax 5.6 21.4
Income tax expense (0.8) (2.1)
Results from discontinued operations (net of income tax) 4.8 19.3
Gain on sale of discontinued operations 141.9 32.9
Capital gains tax arising on sale of discontinued operations (4.5) -
Profit from discontinued operations (net of income tax) 142.2 52.2
Discontinued operations - exceptional items
2008 2007
€m €m
(Profit) on disposal of property, plant & equipment - (4.6)
Taxation effect on exceptional items - 0.2
- (4.4)
Cash flows from discontinued operations
2008 2007
€m €m
Net cash from operating activities (0.8) 34.0
Net cash from investing activities 234.5 4.3
Net cash from financing activities (20.0) (23.0)
Net cash inflow from discontinued operations 213.7 15.3
Depreciation 4.6 10.0
Capital expenditure (2.0) (8.2)
Effect of disposal on financial position of the Group
Soft drinks Snacks
2008 2007
€m €m
Property, plant & equipment 57.1 0.9
Goodwill 32.2 26.7
Inventories 18.5 0.9
Trade & other receivables 52.2 6.4
Deferred tax assets/(liabilities) 3.0 (0.1)
Trade & other payables (50.3) (7.3)
Provisions (0.6) (0.6)
Retirement benefit obligations (19.0) -
Foreign currency reserve de-recognised on disposal (0.5) -
Net assets 92.6 26.9
Consideration receivable 246.6 62.3
Costs of disposal payable (12.1) (2.5)
Net proceeds receivable 234.5 59.8
Profit arising on disposal before tax 141.9 32.9
Tax payable (4.5) -
Profit arising on disposal after tax 137.4 32.9
Cost of disposal includes an allowance for costs not yet paid relating
principally to work to be completed on property assets transferred.
5. Earnings per ordinary share
2008 2007
€m €m
Earnings as reported 234.9 208.2
Adjustments for exceptional items net of tax (131.6) (29.0)
Earnings adjusted for exceptional items 103.3 179.2
Number Number
'000 '000
Number of shares at beginning of year 327,569 325,204
Shares issued in lieu of dividend 727 1,592
Shares issued in respect of options exercised 2,355 773
Own shares purchased and cancelled (17,658) -
Number of shares at end of year 312,993 327,569
Weighted average number of ordinary shares (basic) 321,229 326,517
Adjustment for the effect of conversion of options 2,361 4,609
Weighted average number of ordinary shares, including 323,590 331,126
options (diluted)
Basic earnings per share Cent Cent
Basic earnings per share - cent 73.1 63.8
Adjusted basic earnings per share - cent 32.2 54.9
Diluted earnings per share
Diluted earnings per share - cent 72.6 62.9
Adjusted diluted earnings per share - cent 31.9 54.1
Continuing Operations
€m €m
Earnings from continuing operations - as reported 92.7 156.0
Adjustments for exceptional items net of tax 5.8 8.3
98.5 164.3
Basic earnings per share Cent Cent
Basic earnings per share - cent 28.9 47.8
Adjusted basic earnings per share - cent 30.7 50.3
Diluted earnings per share
Diluted earnings per share - cent 28.6 47.1
Adjusted diluted earnings per share - cent 30.4 49.6
Discontinued Operations
€m €m
Earnings from discontinued operations - as reported 142.2 52.2
Adjustments for exceptional items net of tax (137.4) (37.3)
4.8 14.9
Basic earnings per share Cent Cent
Basic earnings per share - cent 44.3 16.0
Adjusted basic earnings per share - cent 1.5 4.6
Diluted earnings per share
Diluted earnings per share - cent 43.9 15.8
Adjusted diluted earnings per share - cent 1.5 4.5
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.
The issue of certain shares in respect of employee share options is contingent
upon the satisfaction of specified performance conditions in addition to the
passage of time. In accordance with IAS 33 Earnings per Share, these
contingently issuable shares (totalling 400,600 at 29 February 2008 and nil at
28 February 2007) 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.
6. Analysis of net debt
28 February Translation Non-cash 29 February 2008
2007 adjustment Cash flow changes
€m €m €m €m €m
Interest bearing 346.1 - (59.3) 2.1 288.9
loans & borrowings
Cash & cash (40.7) 2.1 5.9 - (32.7)
equivalents
305.4 2.1 (53.4) 2.1 256.2
Interest rate swaps (3.2) - (2.2) 6.0 0.6
302.2 2.1 (55.6) 8.1 256.8
28 February Non-cash 28 February 2007
2006 Cash flow changes €m
€m €m €m
Interest bearing loans & 427.6 (82.0) 0.5 346.1
borrowings
Cash & cash equivalents (44.5) 3.8 - (40.7)
383.1 (78.2) 0.5 305.4
Interest rate swaps 0.3 (0.7) (2.8) (3.2)
383.4 (78.9) (2.3) 302.2
7. Dividends
2008 2007
€m €m
Dividends paid
Final: paid 15.0c per ordinary share in July 2007 (2007: 8.5c paid in July 49.2 27.7
2006)
Interim: paid 12.0c per ordinary share in December 2007 (2007: 12.0c paid in 38.1 39.2
December 2006)
Total equity dividends 87.3 66.9
Settled as follows:
Paid in cash 81.1 54.7
Scrip dividend 6.2 12.2
87.3 66.9
The directors have proposed a final dividend of 15.0 cent per share (2007: 15.0 cent), which is
subject to shareholder approval at the AGM, giving a total dividend for the year of 27.0 cent per
share (2007: 27.0 cent).
Dividends declared after the balance sheet date are not recognised as a liability at the balance
sheet date.
8. Reserves
Group Share Share Capital Capital Cashflow Share Currency Retained Total
Capital Premium Redemption Reserve Hedging based Translation Earnings
Reserve Reserve payments Reserve
reserve
€m €m €m €m €m €m €m €m €m
At 1 March 2006 3.3 18.6 0.3 24.9 (1.5) 1.7 0.6 171.2 219.1
Total recognised income
and expense for the year - - 3.4 - 0.2 210.2 213.8
Dividend on ordinary shares - 12.2 - - - - - (66.9) (54.7)
Exercised share options - 2.0 - - - - - - 2.0
Transfer on exercise/lapse
of share options - - - - - (0.8) - 0.8 -
Equity settled share based
payments - - - - - 4.3 - - 4.3
At 28 February 2007 3.3 32.8 0.3 24.9 1.9 5.2 0.8 315.3 384.5
Total recognised income
and expense for the year - - - - 15.0 - (2.3) 235.9 248.6
Dividend on ordinary shares - 6.2 - - - - (87.3) (81.1)
Exercised share options - 5.9 - - - - - - 5.9
Transfer on exercise/lapse
of share options - - - - - (3.7) - 3.7 -
Own shares acquired (0.2) - 0.2 - - - - (139.9) (139.9)
Equity settled share based
payments - - - - - 1.2 - - 1.2
At 29 February 2008 3.1 44.9 0.5 24.9 16.9 2.7 (1.5) 327.7 419.2
9. Statutory Accounts
The financial information prepared in accordance with IFRSs as adopted by the
European Union included in this report do not comprise "full group accounts"
within the meaning of Regulation 40(1) of the European Communities (Companies:
Group Accounts) Regulations, 1992 of Ireland insofar as such group accounts
would have to comply with the disclosure and other requirements of those
Regulations. The information included has been extracted from the Groups
financial statements which have been approved by the Board of Directors on 9 May
2008. The financial statements will be filed with the Irish Registrar of
Companies and circulated to shareholders in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 17th May 2024
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