FY2018 Half-Year Results. 26 October, 2017

Transcription

1 FY2018 Half-Year Results 26 October, 2017

2 Disclaimer This presentation has been prepared solely in connection with the financial results of C&C Group plc (the "Company") for the period ended 31 August, 2017 and should be read in conjunction with the announcement of the financial results of the Company for the period ended 31 August, 2017, released 26 October, 2017 (the H1 18 Interim Results Announcement ). For the purposes of this notice, the presentation that follows shall mean and include the slides that follow, the oral presentation of the slides by the Company, the question-and-answer session that follows that oral presentation, hard and electronic copies of this document and any materials distributed at, or in connection with, that presentation. This presentation is not intended to and does not constitute or form part of any offer, or invitation, or solicitation of any offer to issue, underwrite, subscribe for, or otherwise acquire or dispose of any shares or other securities of the Company in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The presentation contains forward-looking statements, including statements about the Company's intentions, beliefs and expectations. These statements are based on the Company's current plans, estimates and projections, as well as the Company's expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties, are based on certain assumptions and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any such statements in light of new information or future events, except to the extent required by any applicable law or regulation. Recipients of this presentation are therefore cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Your attention is drawn to the Principal Risks and Uncertainties set out on page 16 of the Company s FY2018 Interim Results Announcement. The risks described, however, are not exhaustive and there may be other risks which may have an adverse effect on the business, financial condition, results or future prospects of the Company. Bulmers Ltd of Clonmel, Ireland, a company within the C&C Group, owns the trade mark BULMERS in the Republic of Ireland. Bulmers Ltd is not connected with HP Bulmer Ltd of Hereford, UK. BULMERS Original Vintage Cider produced by Bulmers Ltd of Clonmel, Ireland is sold outside the Republic of Ireland under the name MAGNERS Original Irish Cider. For further information see C&C Group plc Slide 2

3 H1 FY2018 Performance Overview million Net Revenues Down 3.7% underlying million Branded Net Revenues Down 2.8% million Free cash flow (Pre exceptionals) 131% Conversion of EBITDA 5% growth interim dividend to 5.21 cent per share Supported by strong balance sheet & underlying cashflow 50.5 million Operating Profit Up 0.4% underlying 1 +40bps 1.65x 3 Net Debt to EBITDA Strong balance sheet & flexibility 30.6 million Share buyback in H million share buyback over last 3.5 years 4 2 Improvement in operating margin to 18.5% 1. Underlying performance H1 FY 17 comparative adjusted for (i) constant currency (H1 FY 17 translated at H1 18 F/X rates revenues 14.1m; operating profit 2.0m) and (ii) the impact of certain AB InBev beer volumes in Ireland in the comparative period which transferred to direct supply under the terms of the revised distribution agreements with AB InBev. (H1 17 revenues 9.4m; operating profit 2.8m) 2. H1 FY 17 comparative adjusted for constant currency (H1 FY 17 translated at H1 18 F/X rates revenues 14.1m; operating profit 2.0m) 3. Net Debt as at 31 August 2017 and LTM EBITDA as at 31 August Share buybacks FY15-FY18 YTD C&C Group plc Slide 3

4 Strategic & Operational Highlights Delivering strategic & operational priorities 1) Solid growth in Tennent s from branded and wholesale businesses 2) Smooth transition of cider portfolio to AB InBev momentum building 3) Investment in Ireland delivering growth in Off-trade; remains highly competitive in the On-trade 4) Strong organic growth in Super-Premium & Craft portfolios; acquisition of Orchard Pig 5) Strengthened route to market access in the UK 6) Continued growth in Export 7) Margin improvement driven by improving business mix, cost control & operational efficiency Prepared for ongoing challenges & opportunities C&C Group plc Slide 4

5 H1 FY2018 FINANCIAL REVIEW

6 Summary Financials Year-on-year performance (constant currency) H1 18 H % change Group volumes (khl) - of which branded 2,208 1,531 2,508 1,562 (12.0%) (2.0%) Group net sales revenues ( m) - of which branded (6.8%) (2.8%) Operating profits ( m) - operating margin % % (4.9%) +40bps Profit after tax (pre-exceptionals) ( m) (5.7%) Weighted average number of shares, incl. options (diluted) 309, ,903 (2.0%) Adjusted fully diluted EPS (3.7%) Exceptional items (pre-tax) ( m) n.m. 1. H1 17 comparative adjusted for constant currency (FY2017 translated at FY2018 F/X rates). C&C Group plc Slide 6

7 Volume khl , (123) Branded volumes -2.0% (87) 2,298 (34) (6) (16) (8) (51) 2, * Includes Wines, NABs and on-going own label and contract manufacturing 1. Benefits from 17.5 khl of Orchard Pig volumes acquired in the period C&C Group plc Slide 7

8 Net Revenue m (14.1) Branded revenues -2.8% 275 (9.4) (3.6) (4.8) (0.9) (2.3) (1.2) (1.2) * Includes Wines, NABs and on-going own label and contract manufacturing 1. Benefits from 2.2m of Orchard Pig revenues acquired in the period C&C Group plc Slide 8

9 m % -5.5% -10.2% Lower volumes in period of transition, but momentum building NSV rate deflation 5.3% reflecting distribution margin and mix Can (60%) v bottle mix trend has continued (FY17: 52%) Volumes flat on a global basis, but outperforming in Scotland NSV rate inflation +3.3% H1'17 Core brands NSV Tennent's volume Tennent's price/mix Bulmers volume Bulmers price/mix Magners volume Magners price/mix H1'18 Core brands NSV On-trade volume losses, only partially off-set by growth in off-trade channel Pricing environment remains positive NSV rate deflation -0.5%, reflecting channel mix shift from draught to small pack off-trade 1. H1 17 core brands revenue (globally) adjusted for constant currency C&C Group plc Slide 9

10 Operating Profit (before exceptionals) m (2.0) (2.8) 50.3 (0.7) (0.7) +0.1 (0.1) Benefits from 0.3m of Orchard Pig trading profit acquired in the period, off-set by the negative profit impact of 0.8m of lost own label contracts as a results of Shepton closure C&C Group plc Slide 10

11 Negative Positive Operating Margin 19.0% 18.5% 18.0% 17.5% 18.1% 1 +40bps % Margin Drivers Business mix - Brand revenues -2.8% - Other revenues -11.3% Cost savings - AB InBev related 2.1m - Distribution efficiencies Channel and pack mix - Bulmers (Off/On-trade) - Magners (Glass/Can) AB InBev pricing impact 17.0% H1 FY'17 H1 FY'18 1. H1 FY 17 comparative adjusted for constant currency (H1 FY 17 translated at H1 18 F/X rates revenues 14.1m; operating profit 2.0m) C&C Group plc Slide 11

12 Update on AB InBev Short-term impacts Impacts from revised ABI distribution deal H1 18 vs H1 17 (constant currency adjusted) Volume (khl) NSV 1 ( m) EBIT 1 ( m) Comments Ireland (123) (9.4) (2.2) - Loss of direct supply accounts - Cost savings (123) - (9.4) - (2.8) 0.6 Headcount savings given reduced AB InBev activity in Ireland GB - Increased contract manufacturing - Distribution margin on C&C cider 2 - Cost savings (England & Wales) (2.1) - (2.1) (1.8) 1.5 Some delays on new SKUs, catch-up expected in H2 AB InBev distribution margin Cost synergies in sales and marketing Group (123) (11.5) (2.1) In-line with guidance of 2-3m dilution in 1 st full year 1. H1 FY 17 comparative adjusted for constant currency (H1 FY 17 translated at H1 FY 18 F/X rates) 2. Revenue and margin foregone based on H1 FY 18 volumes at H1 FY 17 NSV/HL and GP/HL C&C Group plc Slide 12

13 Cash flow m FCF 130.9% EBITDA (0.9) (1.8) (3.2) (4.9) (0.7) (3.2) C&C Group plc Slide 13

14 Balance Sheet m 0.0 (50.0) Net Debt to EBITDA 1.65x (100.0) (150.0) (26.0) +2.1 (170.6) (30.6) (12.3) (7.4) (172.6) (200.0) Net debt 28 Feb 2017 Free cash flow Dividends paid Share Buyback Exercise of share options Acquisitions Translation and other Net debt 31 August 2017 (7.4) C&C Group plc Slide 14

15 H1 FY2018 OPERATING REVIEW

16 Maintained Tennent s investment New font roll-out 4,815 new fonts installed Brand Advocacy 2 'A brand I d recommend 33% 36% New social media campaign +2.8% 1 Improvement in RoS 40% growth in social media engagement Brand Salience 2 'A brand I ve heard good things about 22% Most engaged Scottish brand on social media 13% 1. Based on all new fonts installed by 10 th June - 2 month performance versus control group 2. Rolling MAT Feb 17 Total Sample C&C Group plc Slide 16

17 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 leading to improved Tennent s performance Strong share in key channels Tennent s GB Net Revenue Growth Share draught lager Scottish IFT +5.3% and growing rate performance Tennent's on-trade NSR/HL 60 H1 FY 17 1 H1 FY Constant currency C&C Group plc Slide 17

18 FY18 Wk01 FY18 Wk02 FY18 Wk03 FY18 Wk04 FY18 Wk05 FY18 Wk06 FY18 Wk07 FY18 Wk08 FY18 Wk09 FY18 Wk10 FY18 Wk11 FY18 Wk12 FY18 Wk13 FY18 Wk14 FY18 Wk15 FY18 Wk16 FY18 Wk17 FY18 Wk18 FY18 Wk19 FY18 Wk20 FY18 Wk21 FY18 Wk22 FY18 Wk23 FY18 Wk24 FY18 Wk25 FY18 Wk26 FY18 Wk27 FY18 Wk28 FY18 Wk29 Wholesale/3 rd party back in growth GB Stability in number of Wholesale customers Wholesale GB Net Revenue Growth Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep volume growth building through FY % 3.00% 2.00% Rolling 12 weeks yearon-year growth 1.00% 0.00% -1.00% -2.00% H1 FY 17 H1 FY Constant currency C&C Group plc Slide 18

19 Cider Brand Image Ireland Brand Affinity 'Is a brand for me 50% Brand Affinity 'Is becoming more popular with younger drinkers 40% 50% 43% Prompted Awareness 98% 91% 81% 30% 32% 28% 57% 23% 13% 16% 18% Key: Source: Company commissioned market research conducted by Ipsos MRBI (2015) and Behaviour & Attitudes in 2017 C&C Group plc Slide 19

20 Ireland Bulmers Performance Cider category more subdued -1% Bulmers volumes 5%; against strong comparatives +6% Growth in off-trade channel +2%, but off-set by lost distribution points and share in Draught Cider volumes still dominated by Off-trade and Packaged ROI: Total cider category by channel 1 On-Trade: Packaged 2 90% 89% 88% 86% Feb '16 Aug '16 Feb '17 Aug'17 Off-Trade 2 C&C total share: 56% 47% 47% 47% 46% -1% 29% On-Trade Packaged On-Trade Draught Off-Trade Feb '16 Aug '16 Feb '17 Aug'17 On-Trade: Draught 2 60% 11% 91% 83% 77% 73% 1. RoI total cider category volume by channel - 6 months to Aug 2017; Nielsen Ireland Databases 2. RoI total cider category by volume- 12 months MAT share: Nielsen Ireland Databases Feb '16 Aug '16 Feb '17 Aug'17 C&C Group plc Slide 20

21 Bulmers Rate of Sale remains strong Rate of Sale on-trade - draught Rate of sale on-trade - packaged TAPPED BULMERS TAPPED ORCHARD THIEVES Bulmers maintaining its Rate of Sale premium to Orchard Thieves Supported by brand investment in H1 Continue to experience distribution losses in draught Competitor activity focused on top tier accounts PACKAGED BULMERS PACKAGED ORCHARD THIEVES AUG 2016 SEP 2016 OCT 2016 NOV 2016 DEC 2016 JAN 2017 FEB 2017 MAR 2017 APR 2017 MAY 2017 JUN 2017 JUL 2017 AUG 2017 Source: Neilsen databases - Ireland C&C Group plc Slide 21

22 GB Cider Transfer of GB cider brands to AB InBev Overall GB cider volumes flat Slow start, but momentum building Strong comparatives in Magners +11% Magners performed well in range reviews Extended distribution reach, especially in convenience and wholesale +30% Other cider brands -21% Good performance by K Cider enhanced distribution, particularly in convenience Good contribution from Orchard Pig 1 acquisition -6% H1'17 H1'18 1 Orchard Pig acquired May Sales, marketing and distribution retained by C&C Group plc C&C Group plc Slide 22

23 AB InBev Partnership Relationship update Beer Portfolio Cider Portfolio Brands: Territories: Activities: Scotland & Ireland (Independent free trade On & Off) Manufacturing, Sales & Distribution (Brand Marketing Retained) GB (Channel Islands, IOM and National Accounts On & Off) Sales & Distribution (Brand Marketing Retained) H1 performance: Increased pricing impacting revenues and margin Impact of direct supply accounts Transition complete Momentum building H2 opportunities: More stable pricing environment Magners Dark Fruit fast tracked Christmas trading Long-term opportunities: Craft portfolio Further collaboration Significant volume share and value growth Physical distribution synergies C&C Group plc Slide 23

24 Craft Agency Innovation Growing Super-Premium & Craft Portfolio Current Portfolio Highlights in H1 FY 18 Volume Growth Launch of Heverlee in off-trade (Scotland & Ireland) UK-wide distribution with Tesco for H2 Organic growth +24% In house innovation & brand development 1 Menabrea +62% Rights to San Miguel in Ireland Exclusive UK and/or ROI distribution of quality imports 53.4 khl 2 Acquisition of Orchard Pig; Good On-trade penetration in England & Wales (+52% YOY) 5 Lamps now in 210 pubs in Dublin 28.0 khl Partnerships with Local craft H1 FY'17 H1 FY'18 1. In RoI only 2. Acquired April 2017 C&C Group plc Slide 24

25 Core Brand Product Innovation Addressing growth market for bottled Ales Premiumising the Tennent s brand Sweeter proposition developed for Asian markets Addressing growing indigenous cider markets Having consolidated position in Apple Addressing the growing market for flavours 500 accounts in Scotland C&C Group plc Slide 25

26 Admiral Taverns Overview Overview Admiral is a leading operator of pubs across the UK. As at Sept 2017, Admiral owned and operated 845 pubs, predominantly comprising suburban, community or rural pubs in England & Wales. The portfolio is 95% freehold or long leasehold and is operated in the main as a tenanted, tied estate KPI s No. of pubs: 845 Property value: 244m (May16) Wet / dry revenue split (%): 57/43 Position of Admiral in the UK Pub Landscape Geographic presence in UK 1 Key brands 1. As at May16 C&C Group plc Slide 26

27 International Continued Progress North America 68.4 khl -25% YOY EMEA 85.7kHL +2% YoY Asia 11.8 khl +47% YOY Aus/NZ 10.1 khl +78% YoY 1. Excluding impact of discontinued Tennent s Charger volumes of 4.8kHL in India in H1 17; Asia volumes (-8%) if included C&C Group plc Slide 27

28 International Europe - Strong performance for Germany and Russia - Quieter trading in Spain and France Asia - Good initial performance from Tennent s in China, Singapore and South Korea - Launch of Magners Juicy Apple Aus/NZ - Good recovery in Australian volumes under CCA International (excl. North America) +5% Other North America - Cider category declines continue to hamper recovery 1 +11% +4% H1 FY'17 H1 FY'18 1. Excluding impact of discontinued Tennent s volumes of 4.8kHL in India in H1 17; Asia volumes (-7%) if included C&C Group plc Slide 28

29 Driving Operating Efficiencies Site rationalisation completed in FY Transfer production from Borrisoleigh & Shepton Mallet to Clonmel - Utilisation rates driving efficiencies Capacity Utilisation Clonmel & Wellpark 76% 82% Increased direct deliveries is increasing distribution efficiencies for full year FY18 Focus on administrative overheads H1'17 H1'18 - Streamlined divisional structure - c. 3m investment in IT infrastructure will facilitate further efficiencies Distribution Efficiency Total cost per khl -7% FY'17 FY'18 C&C Group plc Slide 29

30 Capital Allocation Re-invest for organic growth Investment in restructuring and cost reduction Progressive dividend policy Selective acquisitions in line with strategy Return excess capital to shareholders H1 FY2018 update Continued investment in core and premium brands Net capex 4.9m in line with guidance Continual focus on operating efficiency and cost reduction Streamline divisional structure delivering admin savings c. 3m of IT spend to drive efficiencies Interim Dividend of 5.21c +5.0% Completed investment in Orchard Pig and Five Lamps and other small acquisitions 12.3m Post balance sheet investment in Admiral Taverns 40m 30.6m buybacks completed in the period Continue share buyback activity on opportunistic basis Balance sheet strength & efficiency Net Debt/EBITDA of 1.65x at 31 August 2017 Admiral Taverns investment will take us to target leverage of 2x Net debt / LTM EBITDA Sustainable Free Cash Flow conversion of 60-70% over medium term C&C Group plc Slide 30

31 OUTLOOK

32 Current trading and Outlook Current trading Solid start to H2 in GB Competitive pressures remain in Ireland Consumer conditions volatile; September poor across the industry Outlook FY 19 and beyond Volume growth through AB InBev and Admiral channels Grow value in Tennent s and Super-Premium portfolio Continued competitive pressure in Ireland Further operational efficiencies Focused growth in selected International markets Solid business, good cash conversion, strong balance sheet - underpin capital returns and strategic opportunities C&C Group plc Slide 32

33 Q&A

34 APPENDIX

35 Core Brand Investment Bulmers Brand Health Scores 1 Top 3 LAD brands in ROI 42 Brand Salience 2 'A brand I ve heard good things about 54% Brand Affinity 2 Popular with younger Drinkers 40% % 32% Brand Health Dipstick Average scores on 5 key questions age group September Source: Company commissioned market research conducted by Ipsos MRBI (2015) and Behaviour & Attitudes in 2017 C&C Group plc Slide 35

36 Outcider Distribution build March April May June July August Volume build 2500 Off-trade On-trade Sweeter proposition within Bulmers family Good distribution achieved in Off-trade (2% market share) On-trade distribution growing and pouring in 307 pubs Activation to stimulate sampling and rate of sale March April May June July August Off-trade On-trade C&C Group plc Slide 36

37 Admiral Transaction structure Shareholder Agreement Shareholder Agreement with Proprium Procurement and Supply Agreement with Admiral Customary shareholder agreement will be entered into between C&C, Proprium and Admiral Management with a long term commitment to unlock synergies and to grow the business C&C and Admiral will enter into a legally binding Procurement and Supply Agreement (PSA) for as long as C&C remains a shareholder, to increase brand awareness and distribution of C&C brands throughout the Admiral estate Mgmt. Proprium Bidco Admiral C&C (47%) Procurement and Supply Agreement C&C Group plc Slide 37

38 Development of our Premium Portfolio Prior Initial investment in 2012 Secure exclusive rights to UK & Ireland Secure UK & Ireland rights Acquired 100% Launched in Scottish and Ireland ontrade Launched in UK & Ireland Initial investment in 2012 JV investment with William Bros Initial investment for 25% Launched in Scottish and Irish Off-trade Note: Calendar years C&C Group plc Slide 38

39 Geographic splits (constant currency) m Great Britain Constant currency H1 18 H1 17 Change % Scotland C&C Brands GB Scotland C&C Brands GB Scotland C&C Brands GB Revenue % (6.5%) +0.9% Net Revenue % (9.6%) +0.7% - Price / mix impact +6.3% +4.6% +8.0% - Volume impact (0.7%) (14.2%) (7.3%) Operating profit % (16.7%) +4.4% Operating margin 18.4% 8.7% 15.6% 17.7% 9.4% 15.0% +70bps (70bps) +60bps Volume (khl) , ,413.6 (0.7%) (14.2%) (7.3%) - of which % Tennent s - of which Magners (5.6%) m International Constant currency H1 18 H1 17 Change % Export N America Int l Export N America Int l Export N America Int l Revenue % (28.3%) (13.4%) Net Revenue % (28.3%) (12.7%) - Price / mix impact (3.7%) (2.9%) (3.4%) - Volume impact +5.2% (25.4%) (9.3%) Operating profit % (20.0%) - Operating margin 19.4% 4.7% 13.6% 18.9% 4.2% 11.9% +50bps +50bps +170bps Volume (khl) % (25.4%) (9.3%) C&C Group plc Slide 39

40 Geographic splits (constant currency) Ireland m Constant currency H1 18 H1 17 Underlying* Change Underlying* H1 17 CC Revenue (5.7%) Net revenue (6.7%) Price / mix impact +0.4% - Volume impact (7.1%) Operating profit (2.6%) 29.5 Operating margin (Net revenue) 23.0% 22.0% +100bps 22.6% Total volume (khl) (7.1%) of which Bulmers (khl) (5.1%) * Underlying H1 FY17 comparatives adjusted for: (i) constant currency (H1 FY17: gross revenues 3.1, net revenues 2.6m; operating profit 0.3m); (ii) the impact of certain AB InBev beer volumes in Ireland in the comparative period which transferred to direct supply under the terms of our revised distribution arrangements with AB InBev (H1 FY17: volumes 123kHl; gross revenues 9.4m; net revenues 9.4m; operating profit 2.8m). C&C Group plc Slide 40