C&C Chief Executive Resigns After Poor Results

10 Oct 2008

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10/10/08 C&C Group plc, a manufacturer, marketer and distributor of branded beverages in Ireland and the UK have parted ways with Chief Executive Maurice Pratt following poor results.

Revenue and Operating Profit for the period ended 31 August 2008 declined by 13.2% and 0.7% respectively. At constant currency exchange rates the declines were 8.8% and 0.9% respectively. Operating margin improved by 1.8 percentage points in the period.

The revenue decline primarily reflects a 12% decline in sales volumes in the Cider division. The improvement in operating margins includes the impact of the restructuring and cost reduction programme, which was implemented in March 2008 and is on track to achieve the target net annual savings of €10 million.

Net Profit before Exceptional Items fell by 6.8% in the period. The decline was mainly due to the reduction in contribution from discontinued operations following the disposal of the Soft Drinks division in August 2007 and the Republic of Ireland wine & spirit distribution business in September 2008.

Net Finance charges fell by €2.2 million reflecting lower debt levels. The effective tax rate for continuing operations was 10.6% in the period compared to 12.0% for the same period in the prior year.

Revenue for the Cider division of €229.8 million represents a 12.6% decline on 2007 and reflects a 12% decline in sales volume. Operating profit declined by 1.6% to €57.2 million compared with €58.1 million in 2007. Operating margin, at 24.9%, improved by 2.8 percentage points versus the prior period. Volumes for the Group’s international cider brand, Magners and the Group’s Irish cider brand, Bulmers, each declined by 12%.

In Great Britain, which is Magners’ principal market, the on-trade cider market grew by 1% in the 5 months to 31 July 2008 compared with the same period last year. This comprised a growth of 4% in draught cider and a decline of 7% in packaged cider.

Magners’ share of the on-trade packaged cider declined from 69% in the 5 months to 31 July 2007 to 52% in the 5 months ended 31 July 2008. Overall distribution levels were broadly unchanged compared with February 2008. The share drop in part reflects the entry of a range of new products and flavour variants into the market.

The off-trade cider market in Great Britain grew by 10% in the 6 months to August 2008 compared with the same period last year. Magners share in the off-trade cider market decreased from 8.3% in the 6 months to August 2007 to 7.5% in the 6 months to August 2008.

Maurice Pratt informed the Board of C&C of his intention to resign his position as Chief Executive. Maurice Pratt has served as Chief Executive of C&C for the past seven years. Maurice Pratt has informed the Board that he has taken this decision because the repositioning strategy he has sought to execute over the past two years has not met the expectations he had set for the business. He believes his decision will best serve the interests of shareholders and employees. He will continue to manage the business during the transition until a new CEO is appointed.

Commenting on his decision to resign Maurice Pratt said “The past two years have been very challenging for C&C Group and despite our best efforts we have not achieved our ambitions for the business. As Chief Executive I have to be accountable and take responsibility for business performance. The company has to take important strategic choices and I have therefore decided it is time to stand aside and allow a new CEO to bring fresh thinking and impetus to the business. It is my clear view that this course of action is in the best interest of the shareholders and employees of C&C. Since I joined the company I have worked with the management team to build our Brand portfolio in cider, spirits and liqueurs. Despite our clear trading difficulties Magners is the market leader for premium cider in the UK. I want to take this opportunity to thank my management colleagues and all of the employees of C&C for their remarkable commitment during what have been extremely difficult times. I am fully committed to continue working with the Board and management to ensure a smooth transition to a new CEO.”