C&C: challenging conditions to remain, net revenue up 18.4%

By Gary Lloyd

- Last updated on GMT

Increased balance sheet strength: improved results have led to dividends for C&C shareholders (credit: Getty/DenisMArt)
Increased balance sheet strength: improved results have led to dividends for C&C shareholders (credit: Getty/DenisMArt)

Related tags Finance Cider Beer

Drinks business C&C Group said it expects macroeconomic conditions to continue affecting trade adversely – particularly in Great Britain – but also announced an 18.4% boost to net revenue in its results for the 12 months ended 28 February (FY23).

The owner of brands including Magners, Menabrea, Orchard Pig and has an equity stake in Innis & Gunn, said margins for the second half (H2) of FY23 were challenged by weakened consumer demand, due to cost of living pressures, various strikes in the UK and latterly Enterprise Resource Planning (ERP) system implementation disruption in the group’s GB distribution businesses.

Net revenue rose to €1,689.0m, driven by volume growth of 4.2% and price-mix growth of 14.2%., from €1,427.1m in FY22. An operating profit increase of 75.6% to €84.1m (FY22: €47.9m) delivered an operating profit margin of 5.0% (FY22: 3.4%).

€25m impact

C&C said, in February 2023, the group implemented a complex ERP system upgrade in its Matthew Clark and Bibendum (MCB) business. The implementation of this advanced warehousing management technology will enhance customer service and improve efficiency. However, it has taken longer than expected, which has impacted service and profitability within MCB. It said last week (19 May)​, it expects a one-off impact of about €25m associated with the ERP system disruption in FY24.

New CEO Patrick McMahon, who took over from David Forde last week​, said: “Set against a challenging backdrop in FY23, C&C delivered an improved performance against all financial measures.

“Increased balance sheet strength and inherently strong, free cash flow characteristics have enabled C&C to return capital to shareholders through the reinstatement of dividends.”

On its brands’ performances in Great Britain, C&C said Tennent’s performed strongly, with volumes up 4.8% in the year including 25.8% in the on-trade while Magners volume was down 6.4% in the year. C&C said: “As a category, total cider volumes in the on and off-trade are down 5.7% compared to pre-Covid. However, consumers are shifting back towards traditional apple cider. Additionally, Orchard Pig grew volumes by 78.9% in the year, albeit from a low base.”

Beer brands

The company’s premium beer brands delivered on-trade volume growth of 43.2% in the year, albeit from a low base. “Menabrea and Heverlee alongside our agency and equity for growth premium brands, Innis & Gunn, Drygate and Jubel, have continued to grow both volume and penetration within our IFT account base compared to prior year,” C&C said.

Despite order placing being an issue for its customers in February​, C&C said distribution volumes were up 6.4% in the year with corresponding net revenues up 19.5%.

It added: “Performance over the key Christmas trading period was negatively impacted by weakened consumer demand and the various strikes in Great Britain. Distribution margins for the full financial year were 2.9%, down from the 4.0% achieved in H1 FY23.

“Due to seasonality, distribution margins were always expected to weaken slightly in the second half of the financial year but the softer than expected trading over the Christmas period, combined with our operational leverage, reduced margins significantly.”

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