Acquisition of The Gaymer Cider Company - Portfolio Diversification & Growth

Transcription

1 Acquisition of The Gaymer Cider Company - Portfolio Diversification & Growth 30 November, 2009

2 Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any shares or other securities of C&C Group plc (the "Company"). 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 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. Recipients are referred to the circular being published to the Company's shareholders which contains further details in respect of matters discussed in the presentation. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Any statement in this presentation which infers that the transaction may be earnings accretive does not constitute a profit forecast and should not be interpreted to mean that the Company s earnings or net assets in the first full financial year following the transaction, nor in any subsequent period, would necessarily match or be greater than those for the relevant preceding financial year. Slide 2

3 Presentation Agenda Background Transaction Rationale Financial Overview Conclusion Q&A Slide 3

4 Deal Overview Asset purchase of The Gaymer Cider Company, an established manufacturer and supplier of cider in the UK, from Constellation Brands Range of UK cider brands: Blackthorn, Olde English and Gaymers, other brands & Own Label production; Cider production facility at Shepton Mallet, Somerset, England; and Distribution warehouse in Bristol, England. Cash consideration of 45 million (c. 50 million) Identified 3 million of cost and revenue synergy benefits Funded by new bank facility of 60 million - limited impact on covenants and liquidity Immediately earnings accretive - returns exceed C&C s weighted average cost of capital Slide 4

5 Transaction Perimeter Cider Facilities & Employees 2m HL cider production facility Shepton Mallet, Somerset, England Second Largest UK Cider Producer Warehouse & distribution facility Shepton Mallet, Somerset, England National Warehouse & distribution facility Bristol, England. 250 Employees Total acquired FY 2008/09 EBITDA: 5.4m* Expected to deliver strong EBITDA growth in FY 2009/10 *Note: EBITDA is an estimate for the Business as it currently shares infrastructure and administration costs with other divisions of Constellation Brands Slide 5

6 Gaymer Branded Cider Portfolio Blackthorn is the largest brand within the Gaymer business Blackthorn Mainstream brand and is the fourth largest cider brand in the UK Sold 270,000 hectolitres in the year to February 2009 (120,000 hl of which was draught) Olde English is an off-trade brand and a value brand Olde English Second largest brand within the portfolio and seventh largest cider brand in UK Sold 200,000 hectolitres in the year to February 2009 Gaymers is primarily an off-trade brand Gaymers Smallest of the three core cider brands but strongest growth characteristics Sold approximately 100,000 hectolitres in the year to February 2009 Slide 6

7 C&C Group Vision To become a successful manager of premium and niche drinks brands in international markets that doesn t rely on scale for success A first rate small company that punches above its weight Slide 7

8 Key Strategic Initiatives Outlined in New Business Structure To allow quick, profit focused decision making Short- Term 2 Strengthen Brand Proposition To meet local consumer and customer needs 3 Improve Cost Position Reduce cost base and over-capacity 4 New Routes To Market Partnership approach in existing and new markets Medium- Term 5 Build Strategic Alliances Maximise the use of our assets to enhance profits 6 Innovation Make product and business innovation a core competency Slide 8

9 Delivering C&C Vision Wholly Owned Brand Portfolio Improved Route to Market Strengthen Brand Proposition Innovation Improve Cost Position Slide 9

10 Transaction Rationale - Portfolio Diversification & Growth Cider category is an attractive and growing category Development of the UK Cider & Perry Market Since the reintroduction of excise duty in September million hectolitres Source: HMRC Releases of Cider & Perry Calendar Year '76e '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09e Slide 10

11 Transaction Rationale - Portfolio Diversification & Growth Transaction is strategically and financially attractive: Consolidates C&C s position as a strong player within the growing UK cider market Broadens existing cider offering with a range of well invested brands Enhances route to market for Magners in the UK Increases channel weighting towards off-trade Immediately earnings accretive and accelerates the Group s long-term growth prospects Slide 11

12 Transaction Rationale - Increases Scope of C&C Cider Business Broadens cider portfolio to address all segments of the market Increases channel weighting towards off-trade which better reflects channel split of UK cider category C&C Group November, 2008 C&C Group November, 2009 Cider Bulmers (Apple) Magners (Apple) Volume 1.5 million HL. Primarily On-Trade Brand Premium cider focus Cider Bulmers (Apple) Bulmers (Pear) Magners (Apple) Magners (Pear) Blackthorn Olde English Gaymers Addlestones Range of Value and Own Label Ciders Volume Brand 3 million HL. Better aligned with on/off channel split Broad range of brands covering all segments of market Slide 12

13 Financial Overview Slide 13

14 Financial Overview m FY 2008/09 12 months ended 28 Feb 2009 Net Sales 63.9 EBITDA* 5.4 Margin 8.5% EBIT* 3.0 Margin 4.7% A&P 5.9 % Net Sales 9.2% Volumes (million hectolitres) 1.51 *Note: EBITDA & EBIT are estimates for the Business as it currently shares infrastructure and administration costs with other divisions of Constellation Brands Slide 14

15 Pro forma EBITDA 2008/9 FY EBITDA of 5.4 million* 3.0m 11.0m* 2009/10 FY forecast EBITDA of c. 8 million* 8.0m* Revenue and cost synergies totaling 3m by FY 2012/13 5.4m* 2008/9 EBITDA 2009/10e EBITDA Synergies Synergised Pro-Forma EBITDA *Note: EBITDA is an estimate for the Business as it currently shares infrastructure and administration costs with other divisions of Constellation Brands Slide 15

16 Cost & Revenue Synergies Identified synergy benefits of 3 million Cost synergies of 1.3 million - optimising sourcing, improving efficiencies and reducing overlap Revenue synergies of 1.7 million - selling broader range of cider brands, in particular draught Blackthorn, through Tennent s distribution network 100% of synergies to be delivered by Feb 2013 phasing to minimise business risk 1.5m cash cost of delivery in 2010/11 Slide 16

17 Acquisition Financing & Structure New bank facility of 60 m (c. 67 m) at market rates - led by Ulster Bank (as Agent) and including BNP Paribas and the Lloyds Banking Group Limited impact on leverage ratios - FY 2010 Net Debt/EBITDA expected to be less than 3 times comfortable covenant headroom and liquidity Leverage ratios expected to return to pre-tennent s acquisition level (c. 2 times) by FY 2012 Expected tax rate of 28% for the acquired business Commitment to maintain current dividend policy Structured as an asset purchase - historic pension liabilities are excluded Slide 17

18 Integration & Completion Integration straight forward given the off-trade weighting of business and relatively small customer base - many of whom are existing C&C customers Established dedicated team to ensure effective integration - significant preparation on integration planning already completed CB will provide transitional services for 6 months Transitional services provide increased flexibility to run this integration process in addition to the integration of the Tennent s business Completion expected January 2010 Transaction not conditional upon clearance by UK Office of Fair Trading ( OFT ) but subject to review by the OFT Slide 18

19 Tennent s Acquisition Update Integration of Tennent s business is progressing well Increased certainty about synergy benefits Integration process in Republic of Ireland complete; integration in Scotland advanced Awaiting OFT final decision on the Tennent s acquisition pending which the Northern Irish businesses are being held separate Slide 19

20 Business Conditions Business conditions in core cider markets remains challenging reflecting continued volatility in economic conditions and consumer confidence Full year operating profit outcome to be in line with previously stated guidance 2009/10 FY guidance, incorporating impact of Tennent s business, will be issued in IMS, mid- January, 2010 Agreement in principle with Molson Coors UK on distribution of draught Magners in GB Slide 20

21 Conclusion "We are pleased to announce our agreement to acquire The Gaymer Cider Company at a price which we consider to be highly attractive for our shareholders. This transaction strengthens our position within the world s largest cider market and broadens the scope of the Group s existing cider offering. John Dunsmore, CEO November, 2009 Slide 21

22 Positioning C&C for long-term growth - Business Transformation over 12 months Nov 2008 New management team join C&C Feb/Mar 2009 Asset write-down, new strategy articulated, new business units established Feb/Mar 2009 Re-organisation and cost reduction progamme implemented Mar 2009 Launch of Bulmers and Magners Pear Jun 2009 Wholesale Price Reduction of On Trade pint bottle, Ireland Aug 2009 Acquisition of Irish, Northern Irish and Scottish assets of ABI (Tennent s) Nov 2009 Variation to Magners draught contract with Molson-Coors Nov 2009 Acquisition of The Gaymer Cider Company Slide 22

23 Positioning C&C for long-term growth - Business Transformation over 12 months C&C Tennent s ABI distribution rights Gaymer Cider Co. Other Assets Wellpark brewery Scotland Pub loan book Tennent s wholesale Non-exclusive on-trade distribution rights 3 year contract brewing agreement Pub loan book Northern Ireland Packaged Non-transnational on- and off-trade Republic of Ireland On- and non-transnational off-trade distribution rights England (& ROW) Shepton Mallet Facility Distribution Facility Slide 23

24 Summary Portfolio Diversification & Growth - Strong Portfolio That Addresses All Segments of the Market Cider Portfolio Slide 24

25 Summary Portfolio Diversification & Growth - Strategically & Financially Attractive 1 Strengthens UK cider business Cider Portfolio 2 Creates a broad portfolio of cider brands 3 Increases scope for cider brand development 4 Excellent expected returns Slide 25

26 Appendix - C&C Group plc Overview

27 H12010 Performance Overview H H Change Change m m Constant Currency Total revenue (10.5%) (6.3%) Cider (10.7%) (6.2%) Spirit & Liqueurs (19.6%) (20.2%) Distribution % +22.3% Cider Volumes Unch. Spirit & Liqueurs Shipments (15%) Slide 27

28 Business Overview Prior to Tennent s & Gaymers Cider H1 2009/10 Comprises 91% of C&C operating profit Volume breakdown by market M agners R OW 12% B ulmers 37% ROI Bulmers 37% GB Magners 51% ROW Magners 12% M agners GB 51% Spirits & Liqueurs H1 2009/10 Comprises 9% of C&C operating profit Volumes breakdown by brand T ull. D ew 39% C aro lans 40% Tullamore Dew 39% Carolans 40% Frangelico 18% Irish Mist 3% Irish M ist 3% F rangelico 18% Slide 28

29 H12010 Cashflow H H Change m m Year-on-Year Operating profit (13.6%) Depreciation (26.6%) EBITDA * (14.6%) Net capital expenditure (4.2) (9.0) (53.3%) % of depreciation 61% 96% Working capital/other 12.7 (15.5) NM Operating cash flow % % of EBITDA 113% 67% Exceptional items paid (12.4) 3.5 NM Net finance charges paid (3.2) (5.8) (45%) Tax paid (3.8) (1.5) +153% Free cash flow % % of EBITDA 83% 62% *H12009 EBITDA is inclusive of the results of discontinued activities Slide 29

30 H12010 Balance Sheet H12010 Net debt* at 1 March, Net Debt to EBITDA 1.9x m Free cash flow in period (53.4) Other (1.7) Net debt* at 31 August, Net Debt to EBITDA 1.7x Pension deficit at 1 March, Pension deficit at 31 August, *Excludes fair value of swap instruments Slide 30

31 C&C Group plc Spirits Portfolio Compact portfolio of attractive niche brands H Shipments Depletions Tullamore Dew (19%) (3%) Carolans (7%) (5%) H volume decline reflects continuing de-stocking Frangelico (21%) (9%) Irish Mist (18%) (8%) Total (15%) (5%) Continuing investment in brands with a consequent impact on margins Recent indications are that de-stocking process may now be drawing to an end Slide 31

32 C&C Group plc 3rd Floor, Block 71, The Plaza, Parkwest Business Park, Dublin 12 Tel: