In my final annual report as Chair of C&C Group, I am pleased to welcome the reopening of the hospitality sector during FY2022 and delighted to be back serving customers and ensuring our strong portfolio of owned and agency brands are available for consumers to enjoy as trading resumes. The last two years has impacted the lives of all our stakeholders and proved an exceptionally difficult time for the hospitality sector and wider supply chains. Despite this challenging backdrop, we are pleased with the robust trading performance of our business during FY2022, the speed in which consumer demand has returned, the acceleration of some pre COVID-19 trends such as premiumisation, and the growing importance of sustainability to all our stakeholders; a key pillar of the Group’s long-term strategy.
Aside from COVID-19 related trading restrictions, the business has broadly navigated the wider supply chain constraints in the UK and taken action to afford itself a degree of protection against the increasingly challenging inflationary environment. Despite these challenges, through FY2022 we executed our strategy and implemented a significant change programme, focused on providing a technologically enhanced platform to sell our brands and partner brands, underpinned by our market leading cost to serve. Notably, as part of this we announced One C&C GB, an initiative to integrate our Tennent’s, Matthew Clark and Bibendum businesses under one management team which will drive efficiencies and improve our service offering to customers. Our core brands in Scotland and Ireland have continued to perform strongly, with both Tennent’s and Bulmers gaining off-trade volume share compared with the pre COVID-19 levels(iii)(iv). With the Group’s strategy focused on three distinct pillars: brand strength; system strength; and sustainability, during FY2022 we made significant investment behind these pillars to consolidate our position as the leading brand-led drinks distributor serving the UK and Irish hospitality sectors.
FY2022 was a year of gradual recovery for C&C and we are pleased to report net revenues of €1,438.1m and growth of +87.8% compared to FY2021 on a constant currency basis(i). This performance was driven by the reopening of the higher margin on-trade which helped the Group return to operating profit generation in June 2021, coinciding with the easing of government restrictions in our core markets. FY2022 provided 267 days of trading where the on-trade was open across Ireland and the UK compared with 117 days in FY2021.
With the increase in on-trade revenues and our successful cost reduction programme, the Group delivered a pre-exceptional operating profit of €47.9 m in FY2022, compared with a loss of €63.6 m in FY2021 on a constant currency basis(i). This, in turn, has delivered an adjusted diluted earnings per share of 7.5c in FY2022 ((21.1)c in FY2021)(ii).
The provenance and unique position of our core brands in the markets they serve ensures a strong platform from which to develop our wider portfolio and we are pleased with the performance and progression of our premium portfolio. We also continued to broaden our portfolio of agency brands, notably securing an exclusive sale and distribution agreement with Moët Hennessy in Scotland. Key to the success in securing this distribution agreement was our system strength which we have continued to enhance during FY2022, through the optimisation of our depot network, continued advances in our ecommerce platform and optimisation of our back-office. In addition, we are pleased to report both our Wellpark and Clonmel manufacturing sites have now removed single use plastic from their consumer packaging, which will remove 300 tonnes of the plastic annually.
The inherent strength of our business model and cash generating characteristics were evident in FY2022, with the Group returning to cash generation. Through prudent balance sheet management and our successful Rights Issue in June 2021, the Group looks to the future from a position of financial strength and is equipped with sufficient liquidity to execute our long-term strategy and navigate any future unexpected trading disruption.
People and Culture
We are a business with a manufacturing footprint and depot network close to the customers and consumers we serve. We have world class facilities and a network that is unrivalled in terms of reach and scale across the UK and Ireland. Integral to our success in optimising this advantage is identifying opportunities and responding quickly to serve the needs of our customers. Our people, and the culture we foster collectively, are at the core of our success. I would like to thank all of my colleagues throughout the business for their dedication and resourcefulness in navigating the challenging market backdrop through FY2022.
The health and safety of our colleagues is our key priority, one which we will continue to invest in to ensure we provide the safest and most enjoyable working environment we can for all those working in C&C. We recognise that as society has reopened and returned to pre COVID-19 characteristics, changes in how we work have had an impact on our colleagues, their wellbeing, and the environment, and consequently, the support we provide. To address this, the Group has a implemented a permanent flexible working policy for those employees who do not need to be site-based. To enhance our working environment, for example we created a Wellness Garden at our Clonmel site which opened in April 2022. The area allows colleagues to take some time out or have a meeting outdoors, providing an environment to relax, refresh and connect. The Group has a number of measures to ensure we are supporting our colleagues which include the provision of impartial advice and information on physical and mental wellbeing, financial concerns and access to specific counselling services.
Mindful of the physical and mental health of our colleagues, in FY2022 we trialled an employee health screening and lifestyle assessment, with over 170 colleagues taking part in Ireland. As result of the positive feedback received, we plan to roll out the equivalent Health and Wellbeing education and support programmes across the Group.
Over the last two years, open and honest discussions on mental health and wellbeing have become ever more important to ensuring that colleagues feel fully supported in the workplace. As part of our external Employee Assistance Programmes that are in place across C&C Group, we have 56 fully certified volunteer Mental Health First Aiders, available to support any colleague at any time until appropriate professional support is received or until the crisis is resolved.
As part of our commitment to the responsible promotion and consumption of alcohol and ongoing efforts to support colleague health and wellbeing and ensure a safe working environment, we have partnered with leading alcohol charity, Drinkaware, to roll out e-learning resources to all colleagues across C&C Group to improve alcohol awareness.
The Board recognises the need to regularly assess employee engagement to develop our people, culture and internal communications. The Group undertakes six monthly employee engagement surveys which are reviewed by managers and by the Board to address any concerns and target investment into our people and culture. In addition, our Board met directly with employees during FY2022 through ‘Our Forum’ sessions which provide a platform for open and honest dialogue between the Board and our colleagues. This continuous review ensures C&C provides the best environment and support for our colleagues to thrive, which will ensure the long-term success of the Group.
Social Responsibility and Environmental Commitments
We recognise the important role that our industry plays in wider society but acknowledge and understand the key role we play in social responsibility within the local communities we serve. We take our responsibility seriously. In terms of strategic oversight, the Board has an ESG (Environment, Social and Governance) Committee that works alongside our ESG team to develop and execute our ESG strategy. Our ESG team includes representation from colleagues at all levels across the business to ensure varied and diverse inputs and a balanced strategy. This year’s Responsibility Report is set out on pages 62 to 81.
At C&C, we are a long-term supporter of minimum unit pricing (‘MUP’), and our experience since its 2018 introduction in Scotland highlights our belief to act responsibly in society’s long-term interests. We welcomed the introduction of MUP in Ireland on January 2022 and support any measures that will reduce problem drinking and associated pressures on public health systems. As part of our commitment to the responsible consumption of alcohol we produce a range of no and low variants of our leading brands which we continue to develop and are active members of both the Portman Group and Drinkaware.
In progressing our environmental commitments, key achievements in the year include the installation of the largest rooftop solar panel farm in Ireland, which will provide 10% of electricity used onsite and removal of single use plastics in our consumer packaging at Clonmel. In addition, with COP26 hosted in Glasgow, the home of our iconic Tennent’s brand, C&C was actively involved in the event showcasing the significant sustainability investment in our Wellpark manufacturing site.
Capital investment during FY2022 has been focused on our brands, system and sustainability, with investment in our branded portfolio through a multi-channel advertising campaign; integration of One C&C GB; and the removal of single use plastic from our canned products at our Clonmel manufacturing site.
We finished FY2022 in a strong position, returning to cash generation and our leverage back within traditional covenants in February 2022, the first time in FY2022. Our ambition is for a medium-term target of less than two times net debt to adjusted EBITDA. With the resumption of the on-trade and our subsequent trading performance, we will continue to deleverage our balance sheet over FY2023, so long as current trading conditions continue. Future capital allocation will be focused on organic or acquisitive growth opportunities to enhance our brands and system, while ensuring we meet our sustainability commitments.
The Group is operating within a period of covenant waivers and as such our ability to return capital to Shareholders is restricted until the end of those waivers in H2 FY2023. We recognise the importance of dividends to our Shareholders and will resume returning capital to Shareholders as, and when, the financial performance and operating environment permit us to do so.
FY2022 saw further evolution of the Board, with Vineet Bhalla joining as Independent Non-Executive Director on 26 April 2021, strengthening our range of skills and experience. Jim Clerkin, Independent Non-Executive Director and Andrea Pozzi Chief Operating Officer (‘COO’) decided to step down from their positions on 27 October 2021 and 1 September 2021 respectively, with their associated Board responsibilities being fulfilled by the remaining Executive and Non-Executive Directors. I am pleased to report that Andrea has taken up the role of leading the management team of our enlarged GB business following the integration of our Tennent’s, Matthew Clark and Bibendum businesses. Lastly, Ralph Findlay joined as Chair designate in March 2022 and will take up the role of Chair following our AGM in July 2022. Ralph brings extensive industry experience, having until recently been Chief Executive of Marstons plc, one of the UK’s most well-known pub groups.
With the easing of restrictions, we are pleased to be meeting face to face again as a Board. As part of our on-going engagement, the Board conducted a number of operating site visits over the course of FY2022. We also completed an internal Board review during the year which reviewed areas such as: Board composition; risk management; performance of our committees; and engagement.
We believe we have a Board with the requisite skills, experience and diversity to support the management of the business as it executes its strategy and remain committed to maintaining the highest standards of governance principles and practice, an overview of which is included on pages 90 to 99.
I am encouraged by the speed and strength in which the on-trade has returned in FY2022. I believe this underlines the important role our industry plays in society and the unique position C&C has as the leading brand-led drinks distributor across the UK and Ireland. We have a proven business model, with our return to profitability aligned with the opening of the on-trade and a return to cash generation. We look forward with optimism, however remain vigilant on the challenging and evolving inflationary environment and will continue to manage this backdrop by taking steps where possible to minimise the impact on our customers, consumers and shareholders. With the actions taken in FY2022 to strengthen our brands, system, and sustainability credentials, C&C is well positioned to execute our long-term strategy.
As I conclude my term as Chair of C&C, I would like to thank all my current and former colleagues who have made my experience as motivating and rewarding as it has been. During my 10 years in the business, the last two years have been some of the most challenging our industry has ever faced, the response of our people and the resilience of our business has been inspiring and I believe the Group is well positioned for the future.
(i) FY2021 comparative adjusted for constant currency (FY2021 translated at FY2022 F/X rates).
(ii) Adjusted basic/diluted (loss)/earnings per share (‘EPS’) excludes exceptional items. During the current financial year, the Group completed a Rights Issue at a discounted price of £1.86. As the rights price was issued at a discount, this was equivalent to a bonus issue of shares combined with a full market price. As such, IAS 33 Earnings Per Share requires an adjustment to the number of shares outstanding before the Rights Issue to reflect the bonus element inherent in it and also for this to be included in the EPS calculation for the prior period presented so as to provide a comparable result. Adjusted basic/diluted earnings/(loss) per share (‘EPS’) excludes exceptional items.
(iii) Nielson, Volume Share of Long Alcoholic Drinks, Off-trade including Dunnes and Discounters, MAT February 2022.
(iv) GB IRI off-trade data 52 week ending 20.03.22.