C&C Group has updated on the integration of the Matthew Clark and Bibendum distribution businesses just over a year on from their acquisition out of administration.

C&C said that with both businesses having traded robustly through the Christmas trading period, it had moved from the stabilisation phase of its recovery plan into simplification and optimisation. A restructure has been completed at both businesses, which C&C said would reduce complexity at the corporate centre and focus resources on core operations. It said it had also made good progress in identifying cost-savings across the Group in logistics and goods not for re-sale.

The company sees the opportunity to raise the profile of C&C’s beer and cider portfolio within the UK on-trade and improve current brand penetration and rate of sale through the Matthew Clark business.

On trading, it said performance had been severely impacted by the business disruption linked to Conviviality Group’s collapse into administration in April 2018. However, trading stabilised across the division through the second half to generate EBIT of €15.7m for the 11-month period since acquisition. The EBIT margin for FY2019 was 1.6% (5 months to Aug-18: 1.2%).

C&C also updated on trading at Admiral Taverns, which it part owns, saying EBITDA for the 12 months to February 2019 was up 1.8% at £23.8m.

In its drinks production business, volumes for the year to 28 February were 1.8% for GB beer and 2.7% for GB cider. Value was ahead by 3.7% and 4.3%, respectively.

On its core brands, it said Tennent’s on-trade volumes were flat overall, but the direct supply independent free trade market continued to grow revenue.

It said the Magners brand had seen a positive uptake within the Admiral estate, with taps nearly doubling to 633 installed as at year end and a healthy rate of sale.

Stephen Glancey, C&C Group chief executive, said: “FY2019 was a transformational year for the Company. Despite strong multi beverage brand led positions in Ireland and Scotland, access to the wider UK on-trade had always been a challenge, the acquisition of Matthew Clark and Bibendum changes this dynamic.

“We are now the largest final mile distributor to the on-trade of alcohol and other drinks in the British Isles with unparalleled access to this profitable market channel. In the longer term this will provide the platform for developing our high premium speciality beers and ciders. It will also make C&C the natural partner for others seeking a gateway through to 60 million high value consumers. As our customers seek channel differentiation and their customers look for choice as well as local authentic product, we are uniquely placed to provide the market solution.

“At the heart of the business the Bulmers, Magners and Tennent’s brand remain remarkably strong and relevant to today’s consumers. We will continue to invest behind the long term health of these brands and innovate to ensure that we adapt to changing consumer requirements and needs. Minimum unit pricing in Scotland demonstrated the value of strong local brands against price led competitors. We are confident that the introduction of similar regulations in Ireland will be equally relevant to Bulmers.

“Our super-premium and craft range has delivered stellar growth in volume and value. We will continue to nurture and grow distribution for these authentic products protecting long term equity value. The Matthew Clark and Bibendum networks, of course, will help achieve this ambition.

“In the acquired business our plan is to steadily restore the equity value rather than chase short term growth or synergy. Value and earnings from a low cost base will take priority and our focus will be on low risk, high value product and customers.

“Everyone associated with Matthew Clark and Bibendum from employees through to suppliers and customers has had a pretty difficult year or so. We are very grateful for all the support we received from key stakeholders, from customers through to suppliers and of course, our colleagues. The key to restoring long term confidence is in the skill set of our managers and their colleagues and this will require shareholder support and patience.

“Our capital allocation strategy will remain set at the return criteria previously described. In principle we seek to invest primarily in our existing business infrastructure and thereafter only in assets aligned to the current operation span. We aim to keep leverage contained to maintain balance sheet flexibility. Thereafter where appropriate we will return surplus cash to shareholders.

“2019 was of course an exceptional year for trading and the weather impact is not something we can necessarily hope to repeat. There remains uncertainty ranging from the impact of geo-political events to the, as yet, unclear Brexit process. Any such event could, of course, impact upon the economic environment within our key markets and consumer confidence. This includes currency risk and the ability to trade freely across borders. Naturally, we have taken all necessary steps to plan for the worst while hoping for the most rationale outcome.

“Set against this backdrop, earnings predictability is a challenge. However, we have continuing momentum across our business. The recovery and performance of Matthew Clark and Bibendum since acquisition is particularly pleasing. These factors contributed to earnings growth of 20% in FY2019. Reflecting the inherent strength of our business today, we are targeting continued, double digit EPS growth in the current financial year. Thereafter, assuming ‘steady state’ market conditions, we will target EPS growth in a mid to high single digit range. C&C is highly cash generative and has inherent balance sheet strength to support our targeted growth range.”

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