Group Chief Executive Officer’s Review

Following a period of unprecedented challenges for the hospitality sector, we are delighted to be back serving our customers and delivering our iconic and much-loved brands to our on-trade and off-trade partners. Encouraged by the response and resilience of the industry, we are pleased with how trading has recovered and the subsequent strength of customer and consumer demand, which we believe reflects the enduring importance of the on-trade and the role it plays in our society.

The strength of our business model is evident, with C&C returning to profit in June 2021 following the easing of government restrictions in our core markets. Furthermore, we have finished FY2022 in a strong position, with a reduced level of net debt and more than sufficient liquidity to manage any near-term uncertainty and deliver our growth objectives.

The Group has navigated a challenging trading environment throughout FY2022, principally the widely publicised UK supply chain constraints, and more recently, inflationary cost pressures. We have effectively managed these challenges over the last twelve months whilst ensuring consistent supply and market leading service.

Despite these challenges, we have continued to execute our strategy by: strengthening our brands and system, enhancing our portfolio; extending our customer offering; investing in technology; driving efficiencies in our network and support office functions; and, ensuring we continue to meet our sustainability commitments.

Strategic development

C&C’s strategy is based on three distinct pillars: brand strength; system strength; and sustainability, the successful execution of which will ensure our company is positioned as the leading brand-led drinks distribution platform in the UK and Ireland.

Our brands are key to the success of our business and as such we have increased investment in our branded portfolio, with direct brand marketing increasing to 7.1% of branded net revenue from pre COVID-19 levels of 5.8% in FY2020. Our brands were back on TV for the first time in a number of years, supported by promotional activity and social media campaigns. This helped improve our brand health scores(viii),(ix) in the year. In January 2022, minimum unit pricing (“MUP”) was introduced in the Republic of Ireland. With our recent experience of MUP in Scotland, we were able to prepare in advance, optimising our Irish branded portfolio through ABV and pack format changes. Early indications show that Bulmers has gained market share, since the introduction of MUP(x).

In July 2021, we announced our intention to create one C&C in Great Britain, aligning our TCB, Matthew Clark and Bibendum businesses under one management team. The initiative will unite and streamline our GB businesses under one go-to-market strategy; simplify and improve the customer experience; create a more efficient GB network with market leading scale, reach and cost to serve; and an optimised support office function. In addition, we have made great progress in aligning our core ERP system across the Group which will further simplify our operations. Continuing our investment in technology, we launched Bibendum’s ecommerce platform in January 2022, ensuring that we now have an online customer offering across the Group.

Financial Performance

C&C’s reported net revenue for FY2022 of €1,438.1m which represents an increase of 87.8% versus last year on a constant currency basis(i). With government restrictions in the hospitality sector easing from April 2021, recovery in the on-trade drove the majority of the uplift, with on-trade net revenues in FY2022 of €1,017.1m, +207.8% versus last year on a constant currency basis(i).

Our operating profit before exceptional items in the year was €47.9m and our overall earnings before exceptionals, interest, tax, depreciation and amortisation was €79.7m(ii). This excluded an exceptional operating profit in the year of €10.6m of which was primarily as a result of the releasing COVID-19 provisions no longer deemed necessary. The FY2022 performance represents a return to profitability for the Group, with the business delivering a basic EPS of 9.9c(iv) and adjusted diluted EPS of 7.5c(iv).

The Group successfully completed a Rights Issue in June 2021, raising gross proceeds of €176.3m. This coupled with disciplined balance sheet management and a return to cash generation has led to net debt(vii) and liquidity(vi) of €271.3m and €438.7m respectively as at year end, compared with €441.9m and €314.6m respectively at FY2021. The Group reduced leverage to 3.4x net debt / adjusted EBITDA as at February 2022, and is back within traditional pre COVID-19 covenants. The Group is on track to meet the next covenant requirements, the waiver of which was negotiated in response to COVID-19, and which ends on 31 August 2022.

Finance costs, including exceptional items in the year, amounted to €22.6m, a decrease of 17.5% versus FY2021, with the proceeds from the Rights Issue being used to reduce gross debt and interest costs.

Our receivables purchase programme has contributed €84.1m to closing cash, an inflow of €37.8m on a constant currency basis(i), driven by the return of the on-trade back to normalised trading conditions. Total working capital during FY2022 was limited to an outflow of €19.2m; with investment into stock, this was supported by €28.8m of tax deferrals, following repayment of €64.3m during FY2022.

Post year end, the Group announced the sale of its joint venture investment in Admiral Taverns to Proprium Capital Partners for a total consideration of £55m. As part of the divestment, C&C has negotiated a long-term branded supply agreement into the Admiral estate. The divestment of Admiral is an indication of C&C’s future focus on its brand-led distribution model.

Capital Allocation

The Group’s capital allocation strategy remains anchored in the sustainable stewardship and growth of our business. The core components in executing our strategy include investment in our existing business; acquisitive growth opportunities that develop our brand or system strength; a target leverage of at or below 2.0x net debt / adjusted EBITDA; and a commitment to return surplus cash to shareholders.

Capital investment in the existing business stood at €17.1m for the year and was focused on sustainability initiatives and technology. Notably, at our Clonmel facility we invested €4.8m to remove single use plastic from our canned products, which will eliminate 150 tonnes of plastic per annum from our products.

We continued our support of the Independent Free Trade (‘IFT’) in both Scotland and Northern Ireland by lending to outlets seeking growth capital for their business plans. These loans stood at €43.0m in FY2022, up from €42.1m in FY2021. Loans are primarily secured by freehold assets and are conditional upon the outlet purchasing our products over the tenure of the agreement.

C&C is committed to a clear and disciplined approach to capital allocation. We understand the importance of dividends to our shareholders, therefore once Group cash flow permits, and we have exited our covenant waiver period, we will return to paying a dividend in due course.

Brand Strength

With the easing of government restrictions in the on-trade, this channel in FY2022, began to recover back to pre-COVID levels, with 71% of FY2022 net revenue generated in the on-trade compared with approximately 80% pre COVID-19. Distribution of our core brands into direct-delivered on-trade outlets has returned to approximately 90.0% of FY2020.

We have seen a strong performance by Tennent’s and Bulmers in FY2022, with both brands driving improved brand health scores(xiv),(xv). Off-trade share has continued to perform strongly, with market share growth compared with pre COVID-19(x),(xi) levels. Similarly, in the on-trade, Tennent’s and Bulmers volume share has increased compared to two years ago(ix),(x) with these brands delivering to 88% and 92% of the outlets compared to FY2020. The Magners performance has been more challenging, with losses in value and volume share in both the on and off trade(x),(xi). Cider’s share of overall alcohol declined in FY2022, which impacted on performance(xx). Magners Original however, remains the number one packaged apple cider by volume and value sales in GB(xv). We are excited by our investment plans for the brand and our wider cider portfolio. Encouragingly, Matthew Clark and Bibendum have grown outlet penetration of our branded cider portfolio in outlets purchasing cider to nearly 50%, a growth of c.3% on FY2020.

Our premium beer portfolio, driven primarily by Heverlee, Menabrea, Drygate, Innis & Gunn and Jubel, grew its penetration of our Scotland IFT outlet base in FY2022 to 40%, compared with 35% in FY2020. Despite the periods of on-trade closures, coupled with hospitality restrictions, GB premium beer volumes reached 95% of FY2020 levels, with both Menabrea and Innis & Gunn outperforming FY2020 volumes. In Matthew Clark and Bibendum, we have grown the outlet penetration of our premium beer brands compared to total beer distribution outlets by c.+30% versus FY2020.

System Strength

During FY2022 we successfully implemented our efficiency and cost saving programme, delivering €18m of annualised savings compared to our pre COVID-19 cost base. The majority of savings were driven by the consolidation of the distribution network across GB, improving customer service whilst providing a broader offer. While completing our network consolidation, the business has navigated the UK supply chain constraints and broadly met the needs of customers through peak trading periods. Our nationwide network is owned and managed in-house which afforded the Group some protection from supply constraints being experienced by other businesses, further reflecting the strength of our underlying business model. In addition, we have rationalised our third-party brand stocking range and implemented minimum order values across the Group to further drive efficiencies.

The Group has continued to grow ecommerce revenues in FY2022 and now provides an online ordering platform for customers across the Group. I am pleased to report that we continue to see enhanced order sizes through our ecommerce platform compared with traditional contact centre orders. In addition to an enhanced customer offering, our ecommerce platform delivers support office efficiencies. To further promote the use of online ordering, we moved all promotional activity to online and partly as a result, 60.2% of Matthew Clark IFT customers now order online.

The Group navigated the CO2 shortages which affected the industry during FY2022. Following previous investment at our Wellpark and Clonmel manufacturing facilities with CO2 recovery systems, the Group was able to ensure continuity of service and meet customer and consumer demand for our brands.

Our Team

Central to the success of our business is a team of dedicated colleagues, passionate about our brands and delivering outstanding service to our customers. The closure of the hospitality sector meant many of our colleagues faced periods of furlough throughout the pandemic. Despite this, our colleagues demonstrated tremendous flexibility and commitment as the industry re-opened post lockdown. Our team was further challenged by the well documented labour shortages in the supply chain and again responded with remarkable adaptability and resourcefulness to deliver great service to our customers.

In positioning and strengthening C&C for the future, we simplified and centralised a number of business functions throughout the Group, which regrettably meant that some colleagues left our business as their roles became redundant. I would like to sincerely thank all our colleagues, past and present, for their commitment to our business, and their resilience throughout what has been two of the toughest years our industry, and our business, has experienced.


C&C has continued to invest significantly in sustainability, with over half of capital investment in FY2022 linked to sustainability projects. Notable FY2022 achievements on our sustainability initiatives include: the removal of single-use plastics in our canned products manufactured in Clonmel; the installation of Ireland’s largest rooftop solar farm at Clonmel powering 10% of our site electricity needs; and Wellpark being voted the Sustainable Brewery of the Year at the Scottish Beer Awards. As C&C is a distributor as well as manufacturer, we purchase significant volumes of product for resale. We therefore expect the highest sustainability standards from our suppliers and ensure this through ethical procurement practices and a rigorous supplier selection process.

We acknowledge the positive role our industry plays in society and our position within it as a producer and distributor of alcoholic beverages. We are passionate about ensuring the safe and responsible consumption of alcohol. In that context, we use our marketing assets to promote responsible consumption and are active members of both the Portman Group and Drinkaware.

The Group recognises the essential role of sustainability in the decision making for all our stakeholders. The commitment and delivery of our sustainability objectives are central to our long-term strategy and role we play in wider society. Sustainability is therefore at the core of our decision making throughout the Group, with sustainability metrics also now forming part of our executive renumeration, to ensure alignment between executive incentives, responsible business and stakeholder expectations.

Our sustainability commitments and achievements are disclosed in more detail on pages 62-81.

Summary and Outlook

I am encouraged by our performance in FY2022 as the Group returned to profitability and cash generation, demonstrating the inherent strength of our business model, the resilience of our brands and the ability of our team. As the on-trade has returned, I am proud of how the Group has responded to increasing levels of demand from customers and consumers. We have successfully navigated a challenging backdrop throughout FY2022, while continuing to deliver market-leading service. This has only been made possible by the dedication, commitment and agility of my colleagues at every level throughout the business.

Looking forward, we are operating in a challenging inflationary cost environment and will continue to monitor this closely over FY2023 and beyond. We have already taken actions to afford the business a degree of protection, through our successfully executed cost reduction plan, our recent price increases and input cost hedging. Despite the current positive sentiment in the hospitality sector post reopening, we are mindful of the pressures being faced by consumers and its potential impact on future demand.

FY2022 finished with a robust return of the on-trade, and we are excited for the opportunities ahead. We have and will continue to enhance our branded portfolio through increased investment and product development, utilising our system to win in cider and strengthen our position in premium beer. Through technology, we will create a more streamlined business which will in turn deliver an improved customer experience and service. I am confident that the Group will continue to play a key role in the UK and Irish drinks market and is well positioned to drive sustainable growth and create long-term returns for our shareholders.

David Forde

Chief Executive Officer