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C&C GROUP PLC
INTERIM MANAGEMENT STATEMENT FOR THE THREE MONTHS ENDED 31 MAY, 2007
Dublin, London, 13 July, 2007: C&C Group plc (‘C&C’ or the 'Group’), a leading manufacturer, marketer and distributor of branded beverages in Ireland and the UK, today issued the following Interim Management Statement for the three months to 31 May 2007, in advance of the Company’s AGM to be held at 12.00 noon today in the Westbury Hotel, Grafton Street, Dublin 2. C&C is issuing this statement in line with the reporting requirements of the EU Transparency Directive.
Revenue
Revenue(i) growth for the quarter to 31 May, 2007 shows an increase of 15% compared with the same period last year. This performance primarily reflects the growth of Magners in Great Britain and Bulmer’s continuing out-performance of the LAD market in Ireland.
Total branded cider(ii) sales volumes, in the first quarter, increased by 38% on the prior year. This primarily reflects growth of Magners in Great Britain of c.89% and Bulmers in Ireland of c. 2%. Performance in the three months to 31 May, 2007 was negatively impacted by a pre-price increase sell-in in February which consequently affected sales shipments during the quarter. Underlying volume growth for Magners in Great Britain, allowing for this, is estimated at c. 130% in the quarter – a satisfactory performance in a cider market characterised by mixed weather in the period (good in April and poor in May) and heavy price-led competition. Performance was boosted by comparison with the same period last year when the brand was being rolled out from London to the rest of England and Wales.
In the quarter to 31 May 2007 Magners underlying cider volume growth was broadly in line with the Group’s full year guidance in relation to Great Britain. On-trade distribution in the quarter held at 67% while, on an MAT basis, market share of LAD improved from 1.7% at 28th February 2007 to 2.0% at 31st May, 2007 (Source: AC Nielsen).
Revenue for Spirits & Liqueurs declined by 6% in the period due to phasing of shipments while Soft Drinks revenue grew by 7%.
Margins
Group operating margin(i) for the quarter was over three percentage points lower in the first quarter than in the same period last year. This decline reflects increased marketing expenditure and warehousing costs together with a decline in gross margin due to a combination of increased raw material costs and higher fixed manufacturing costs associated with cider capacity expansion.
Other
Magners market tests are continuing in Barcelona and Munich. In line with previous guidance, it will be October 2007 before any initial conclusion can be drawn as to Magners’ future prospects in these markets.
The Group’s expansion of its cider manufacturing capacity is proceeding to plan and the new capacity is now operational. C&C’s capacity expansion will involve capital expenditure of approximately €160 million in the 2007/08 fiscal year.
During the quarter, the Group entered into an agreement to sell its soft drinks division and related assets (Republic of Ireland wholesaling) to Britvic plc for a consideration of €249.2 million, payable in cash upon completion. Subject to Competition Authority approval, completion of the sale is expected to occur by 31 August 2007.
The Group recently commenced an on-market share buy back programme. Since the programme commenced in mid June, the Group has acquired 5.5 million shares at an average price of €10.59 per share.
Outlook
C&C’s sustained investment is creating a strong consumer franchise for Magners in Great Britain - reflecting the premium positioning which C&C’s Bulmers brand enjoys in Ireland. This underpins the Group’s confidence in the brand’s ongoing growth potential.
The second quarter of the year is crucial to full year performance for reasons both of its seasonal importance and the impact of summer recruitment on performance for the rest of the year. Very poor weather in June and into July together with continued heavy price-led competition is likely to lead to a weak second quarter and, as a result, while the Group expects strong volume growth for the full year in Great Britain it is reducing its sales volume expectations.
The Group’s current high level of marketing investment and other fixed costs result in financial performance being particularly sensitive to variations in sales volumes. While these costs will ultimately be absorbed as cider volumes grow, lower sales volume expectations are likely to result in full year operating profit(iii) for 2007/08 approximately matching last year.
The weighting of marketing investment to the first half year, the phasing of costs associated with capacity expansion and the impact of the February sell-in are expected to result in a decline in operating profit in the half year ending August 2007 compared with the same period last year.
The next update on performance will be on 31 August, 2007 when the Group will issue its first half trading statement.
Investor and Analyst Conference Call Details
Maurice Pratt, Group Chief Executive Officer and Brendan Dwan, Group Finance Director will host a conference call for institutional investors and analysts at 10.30am (local Irish time) today. Dial in details are available from K Capital Source on +353 1 631 5500 or c&cgroup@kcapitalsource.com
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Investors and analysts |
Irish Media |
International Media |
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Mark Kenny or Jonathan Neilan
K Capital Source
Tel: +353 1 631 5500
Email : c&cgroup@kcapitalsource.com
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Paddy Hughes or Ann-Marie Curran
Drury Communications
Tel: +353 1 260 5000
Email: phughes@drurycom.com
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Edward Orlebar
M Communications
Tel: +44 207 153 1523
Email: orlebar@mcomgroup.com |
(i) Continuing operations – before exceptional items and excluding Snacks division.
(ii) Combined Bulmers and Magners
(iii) Continuing operations – before exceptional items and excluding Snacks and Soft drinks division.
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