9th May 2006 07:00
C&C Group Plc09 May 2006 9 May, 2006 C&C GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR YEAR ENDED 28 FEBRUARY 2006 Dublin, London, 9 May, 2006: C&C Group plc ('C&C' or the 'Group'), the leadingmanufacturer, marketer and distributor of branded beverages and snacks inIreland, today announced its results for the year ended 28 February 2006. Financial Highlights (i) • Revenue growth of 9% to €817 million. • Operating Profit growth of 13% to €124.7 million. • Adjusted EPS of 29.9 cent (an increase of 15.9%); basic EPS of 29.6 cent. • Final proposed dividend of 8.5 cent per share; total dividend of 15 cent per share - up 15.4%. • Free cash flow of €89 million (62% of EBITDA). • Net debt reduced by €58 million to €383 million. Operating Highlights • Volume of the Group's Irish cider brand, Bulmers, increased by 6% against an Irish LAD(ii) market growth of c2%. • Volume of the Group's international cider brand, Magners, increased by 130%. • Tullamore Dew volume depletions (iii) increased by c19%. • Marketing investment of €58 million, increased by 27%(i) . (i) Comparisons are based on figures before exceptional items and are on a constant currency basis. (ii) Long Alcohol Drinks (Beer, Cider, RTD's). (iii) Defined as sales by distributors to customers. Performance Highlights Maurice Pratt, C&C Group Chief Executive Officer commented, "C&C is pleased toreport continuing revenue and earnings growth. We will continue to invest in thesustainable growth opportunities presented by Magners, Bulmers, and TullamoreDew". Investors and analysts Irish Media International Media Mark Kenny or Jonathan Neilan Paddy Hughes Edward OrlebarK Capital Source Drury Communications Finsbury Group Tel: +353-1-631 5500 Tel: +353-1-260 5000 Tel: +44-20-7251 3801Email : c&[email protected] Email: [email protected] Email: [email protected] Full year results for year ended 28 February 2006 C&C is reporting operating profit of €124.7 million, an increase of 13%(i) onthe previous year. The outcome represents an adjusted earnings per share of 29.9cent for the year ended 28 February, 2006. Free Cash Flow of €89 million wasgenerated in the period. C&C's strategy is to sustain growth through brand management expertise bygenerating and exploiting higher margin growth opportunities for cider both inIreland and internationally and for spirits & liqueurs internationally. This, inturn, supports strong cash generation capability and a progressive dividendpolicy. Dividends Subject to shareholder approval the proposed final dividend of 8.5 cent pershare will be paid on 11 July 2006 to ordinary shareholders registered at theclose of business on 19 May 2006. This dividend is subject to Irish DividendWithholding Tax (where applicable). The Group's full year dividend willtherefore amount to 15 cent per share, an increase of 15.4% on the previousyear. A scrip dividend alternative will be available. Outlook - Investing for Sustainable Growth The Group's primary focus is to invest for sustainable growth opportunitiespresented by Magners internationally and Bulmers in Ireland. C&C plans to extendMagners distribution throughout Great Britain in 2006/07 and to support thiswith a national media campaign. The objective is to double Magners' existingshare of the on-trade LAD market within that period. The growth opportunity for Magners will be supported by a significant investmentin cider capacity in 2006/07 representing capital expenditure of approximately€50 million. This project is proceeding according to plan. The Group also plans to sustain growth in International Spirits & Liqueursthrough increased investment in its Tullamore Dew Irish whiskey brand. Within the Soft Drinks & Snacks and Distribution divisions the objective in 2006/07 is to stabilise underlying performance recognising that the loss of thedistribution rights for Volvic and Evian in the Republic of Ireland from 30November 2005 and the loss of the distribution of Allied Domecq brands from 31January 2006 will affect 2006/07 financial performance. On 13 April, 2006, the Group also announced that it is undertaking a strategicreview of its Snack business, Tayto. This strategic review process is at anearly stage and there can be no certainty that any transaction in relation toTayto will ultimately occur. Fiscal year 2006/07 has started satisfactorily, with the roll out of Magners inGreat Britain proceeding well. In overall terms, the Group expects to deliver continued revenue and operatingprofit growth for the 2006/07 full year. However, given the extent of themarketing investment to support Magners roll out, earnings growth is expected tobe heavily weighted towards the second half of the year. (i) Comparisons are based on figures before exceptional items and are on a constant currency basis. OPERATIONS REVIEW Summary On a comparable basis(i) revenue and operating profit increased by 9% and 13%respectively. This principally reflects growth in the Cider division arising from the successof the Bulmers and Magners brands. Operating profit margin increased by 0.6percentage points which reflects the strong growth in the high margin Ciderdivision. Operating margins increased in the Cider and the International Spirits& Liqueurs divisions but declined in the Soft Drinks & Snacks and Distributiondivisions. Summary income statement (before exceptional items) Year ended Year ended Year ended 28 February 2005 (ii) 28 February 2005 28 February 2006 Constant CurrencyRevenue •m 816.6 750.4 747.7Growth % 8.8 9.2Operating Profit •m 124.7 112.4 110.1Growth 10.9 13.3Operating Profit Margin % 15.3 15.0 14.7Net Finance Charges •m (18.6) (21.6)Taxation •m (9.3) (8.1)Profit attributable to •m 96.8 82.7ordinary shareholdersGrowth % 16.9 Revenue and operating profit, on a reported basis, increased by 8.8% and 10.9%respectively. These figures include the impact of currency depreciation,principally the US Dollar, on the results of our International Spirits &Liqueurs division. Profit attributable to ordinary shareholders increased by 17% in the year. Inaddition to operating profit growth, this increase reflects a decline ininterest charges arising from a reduction in the level and cost of debt over theperiod. (i) Comparisons are based on figures before exceptional items and on a constant currency basis.(ii) Restated on an IFRS basis DIVISIONAL REVIEW - CIDER Year ended Year ended Year ended Growth 28 February 2006 28 February 2005 28 February 2005 Year-on-Year •m •m (constant currency) (constant currency) •m %Revenue 278.4 212.6 212.5 31.0Operating Profit 85.3 64.8 64.8 31.5Operating Margin % 30.6 30.5 30.5 Revenue for the Cider division increased by 31% in the year, principallyreflecting an 8% increase in respect of Bulmers and approximately 150% inrespect of Magners. The operating margin for the Cider division at 30.6% was marginally ahead of theprior year after a 2.3 point increase in marketing investment. The overall Irish LAD market (i) increased by 1.9%(ii) in the year comprising adecline of 1.4%(iii) in the on-trade and growth of 11.9%(iii) in the off-trade.The relative channel performance is due, in part, to the impact of the smokingban in the early part of the fiscal year and also reflects market trends. Sales volume of the division's principal cider brand Bulmers increased by 6% onthe prior year and continued to increase its share of the overall LAD market.According to Nielsen, Bulmers' share of the on-trade LAD market increased from9.6% to 10.0% in the period while its share of the off-trade LAD marketincreased from 6.6% to 7.0%. In the year C&C's international cider brand, Magners, significantly increasedits distribution in Great Britain as a result of its launch in London andcontinued, strong growth in Scotland. By 31 January 2006, Magners had achieved70%(iii) turnover weighted distribution in the on-trade in Scotland and 44%(iii)in London. The brand continues to show strong growth in Northern Ireland whereits share of the on-trade LAD market increased from 5.4% to 6.4%(iii) in theyear to the end of February 2006. (i) All market share statistics refer to volume.(ii) Revenue Commissioners(iii) Nielsen DIVISIONAL REVIEW - INTERNATIONAL SPIRITS & LIQUEURS Year ended Year ended Year ended Growth 28 February 2006 28 February 2005 28 February 2005 Year-on-Year •m •m (constant currency) (constant currency) •m % Revenue 68.8 70.1 67.7 1.6Operating Profit 16.3 17.6 15.4 5.8Operating Margin % 23.7 25.1 22.7 Revenue for the International Spirits & Liqueurs division, on a constantcurrency basis, increased by 1.6% in the year, reflecting a decline in shipmentvolumes of 1% offset by favourable price/mix. Volume depletions are estimatedto have grown by 3% in the period. The operating margin for the division on a constant currency basis, at 23.7%,was up one percentage point on last year due principally to reduced raw materialcosts. C&C's premium Irish whiskey brand Tullamore Dew performed particularly well withshipment growth of 15% and depletions growth of c19% in the year. C&C increased its marketing investment in Tullamore Dew in the year by 15%. Thisinvestment again reflects the Group's commitment to build international growthbrands by focusing investment in brands and markets with attractive growthopportunities. Shipments of C&C's Irish cream liqueur brand, Carolans, declined by 10% in theyear which, in part, reflects an excess of shipments over depletions in theprior year. Depletions however were forecast to have declined by 5% in the year.This decline primarily reflects ongoing price competition in the UK market. Frangelico, the Group's hazelnut liqueur brand, had an overall solid in-marketperformance recording a small growth in depletions. Towards the end of the fiscal year C&C effected a change in its InternationalSpirit & Liqueur distribution network from Allied Domecq in relevant markets.This change has gone smoothly with no market disruption. DIVISIONAL REVIEW - SOFT DRINKS & SNACKS Year ended Year ended Year ended Growth 28 February 2006 28 February 2005 28 February 2005 Year-on-Year •m •m (constant currency) (constant currency) •m % Revenue 234.9 238.7 238.6 (1.6)Operating Profit 17.8 24.3 24.2 (26.4)Operating Margin % 7.6 10.2 10.1 Revenue for the Soft Drinks & Snacks division declined by 1.6% in the yearmainly reflecting a volume decline arising from difficult market conditions anda drop in market share. Operating margin for the division at 7.6% was down 2.6 percentage points on lastyear. The decline in operating margins reflected increases in raw material anddistribution costs and increased marketing investment in the growing energysegment of the market. Danone withdrew the distribution for the Volvic and Evianbrands from 30 November 2005 - the impact of this on the 2005/06 full yearresults, however, was relatively minor. The margin decline was primarilyconcentrated in the Soft Drinks grocery channel. Production of the Group's crisp product range was outsourced in October 2005,and this enhanced margins in the Snacks business. The soft drinks market(i) grew by 1.9% in the year reflecting, growth in bottledwater, sport and energy drinks and cordials offset in part by the ongoingdecline in carbonated soft drinks. C&C's overall soft drinks volumes (which includes Northern Ireland) declined by0.5% in the year. This represented a decline of approximately 1.6 points inmarket share in the Republic of Ireland and share improvement in NorthernIreland. The overall savoury snacks market declined by 1.3%(ii) in the year. Thiscomprised growth in snack products and a decline in crisps. C&C's market sharedeclined in the period, in part due to supply interruption during the start upphase of the outsourcing of manufacturing. Stabilising financial performance in this division in 2006/07 is a priority.Steps taken to date, to enhance performance, include streamlining the SoftDrinks organisation structure; the appointment of new leadership in Soft Drinksand outsourcing of snack production. As outlined previously, on 13 April 2006 the Group also announced that it iscurrently undertaking a strategic review of its Snacks business. This strategicreview process is at an early stage and there can be no certainty that anytransaction will ultimately occur. (i) Carbonated soft drinks/bottled water volumes for Republic of Ireland per the Beverage Council of Ireland(ii) Nielsen DIVISIONAL REVIEW - DISTRIBUTION Year ended Year ended Year ended Growth 28 February 2006 28 February 2005 28 February 2005 Year-on-Year •m •m (constant currency) (constant currency) •m % Revenue 234.5 229.0 228.9 2.4Operating Profit 5.3 5.7 5.7 (7.0)Operating Margin % 2.3 2.5 2.5 Revenue for the Distribution division increased by 2.4% in the year comprisinggrowth of 3.4% for Wine & Spirits distribution and 1.5% in Wholesaling/Agency. Operating margins declined by 0.2 points as a result of increased competition inWholesaling/Agency. The distribution of Allied Domecq brands ceased from 31 January 2006 but thishad no material effect on the results for the period. FINANCE REVIEW Cash Flow Free cash flow of €89 million for the year represented 62% of EBITDA -moderately ahead of the Group's medium term target of 60%. This performancereflects the relatively low net capital expenditure during the year as a resultof property disposals. Re-organisation costs, paid in the year, principallyrelate to redundancies associated with outsourcing of snacks production inOctober, 2005 and were, in cash terms, offset by associated property disposals.The increase in working capital includes a significant increase in Cider stocksto support future growth. A summary Cash Flow for the year ended 28 February 2006 is set out below: Year ended Year ended 28 February 2006 28 February 2005 •m •mOperating Profit (i) 124.7 112.4Depreciation 19.6 20.5EBITDA 144.3 132.9Share Based Employee Benefits 1.1 0.6Net Capital Expenditure (9.9) (8.2)Working Capital (10.1) (2.5)Operating Cash Flow 125.4 122.8Re-Organisation Costs (10.9) (4.6)Finance Charges (ii) (17.6) (22.0)Taxation Payments (8.0) (8.2)Free Cash Flow (FCF) 88.9 88.0FCF/EBITDA 62% 66% (i) Before exceptional items.(ii) Excluding IPO related finance costs in 2005 Net Capital Expenditure Net capital expenditure for the period of €9.9million comprised gross capitalexpenditure of €25 million and asset disposals of €15 million. The gross spendincluded the initial expenditure on the cider capacity expansion project andgeneral maintenance capital. Completion of the current phase of cider capacityexpansion will take place in 2006/07. Disposals principally comprised the sale of the snacks plant in Dublin followingthe outsourcing of manufacturing. Finance Charges The reduction in finance charges is due to reduced debt levels arising from cashflow; reduced interest rates following a re-negotiation of margins in August2005; and improved debt ratios. It also reflects the much higher cost of debt inthe period prior to IPO in May 2004. Interest rates (excluding margin) applying to debt for the year to February 2006averaged 3%. Future interest rate exposure is partially hedged at the followinginterest rates (excluding margin): Fiscal year 2007 €250 million hedged at 3.4% Fiscal year 2008 €200 million hedged at 3.3% Fiscal year 2009 €100 million hedged at 3.1% Fiscal year 2010 €100 million hedged at 3.1% Fiscal year 2011 €50 million hedged at 3.5% Taxation The tax charge for the year represents an effective tax rate on profit beforeexceptional items of 10% less a credit for excess provision in previous periodsof €1.2 million. Net Debt Net debt at 28 February 2006 amounted to €383 million. The movement in net debtbetween 1 March 2005 and 28 February 2006 is outlined below. At 28 February2006, EV gearing (net debt/market capitalisation plus net debt) was 17%. Netinterest charge was covered 8 times by EBITDA before exceptional items. •mNet Debt at 1 March 2005 441.0Free Cash Flow in Period (88.9)Dividends 29.9Other 1.1Net Debt at 28 February 2006 383.1 Foreign Exchange Exchange rate movements in the year adversely affected operating profit by €2.3million. This is made up of a loss in the International Spirits & Liqueursdivision arising from transaction exposure to the US Dollar and Canadian Dollar(€2.2 million) and a loss arising from translation exposure to Sterling (€0.1million). Pensions The adoption of IFRS has resulted in a liability of €50m (net of tax) on thebalance sheet at 28 February 2006 representing pension fund deficits. While theactuarial valuations at 1 January 2006 are not yet finalised, it is estimatedthat deficits in the group schemes on an ongoing funding basis should not exceed€20m. Comparative reporting Profits for each division in the Operating and Financial Review are shown atconstant exchange rates for transactions in relation to the InternationalSpirits & Liqueurs division only and for translation in relation to the GroupSterling denominated subsidiaries. The reconciliation to reported figures isoutlined below. FX FX Year to Previously IFRS Re-Classification Re-stated Translation Transaction 28 Feb '05 Reported Adjustment Total Comparative Year to 28 Feb'05 •m •m •m •m •m •m •m Revenue Cider 212.6 212.6 (0.1) 212.5 Internationalspirits &liqueurs 68.5 1.6 70.1 (2.4) 67.7 Soft drinks & snacks 238.7 238.7 (0.1) 238.6 Distribution 230.6 (1.6) 229.0 (0.1) 228.9 Total 750.4 0 750.4 (0.3) (2.4) 747.7 Operating Profit Cider 66.4 (1.6) 64.8 64.8 Internationalspirits &liqueurs 17.6 (0.2) 0.2 17.6 (2.2) 15.4 Soft drinks & 25.1 (0.8) 24.3 (0.1) 24.2snacks Distribution 6.0 (0.1) (0.2) 5.7 5.7 Total 115.1 (2.7) 0 112.4 (0.1) (2.2) 110.1 Special note regarding forward-looking information Some statements in this Announcement are forward-looking. They represent ourexpectations for our business, and involve risks and uncertainties. We havebased these forward-looking statements on our current expectations andprojections about future events. We believe that our expectations andassumptions with respect to these forward-looking statements are reasonable.However, because they involve known and unknown risks, uncertainties and otherfactors, which are in some cases beyond our control, our actual results orperformance may differ materially from those expressed or implied by suchforward-looking statements. Group income statementFor the year ended 28 February 2006 Year ended 28 February 2006 Year ended 28 February 2005 Before Before exceptional Exceptional exceptional Exceptional items items items Items •m •m Total •m •m Total •m •m Revenue 816.6 - 816.6 750.4 - 750.4 Operating costs (691.9) (1.4) (693.3) (638.0) (0.1) (638.1) Operating Profit 124.7 (1.4) 123.3 112.4 (0.1) 112.3 Finance income 0.9 - 0.9 0.7 - 0.7Finance costs (19.5) - (19.5) (22.3) (9.2) (31.5) Profit before tax 106.1 (1.4) 104.7 90.8 (9.3) 81.5 Income tax expense (9.3) 0.4 (8.9) (8.1) 2.5 (5.6)Profit for the yearattributable to ordinaryshareholders 96.8 (1.0) 95.8 82.7 (6.8) 75.9 Basic earnings per share (cent) 29.6c 23.6cDiluted earnings per share (cent) 29.4c 23.6c Group balance sheetAs at 28 February 2006 2006 2005ASSETS •m •mNon-current assetsGoodwill 461.9 461.9Property, plant & equipment 134.1 142.4Derivative financial asset 1.0 -Deferred tax 9.1 7.9 606.1 612.2Current assetsInventories 55.1 49.2Trade & other receivables 114.0 92.6Cash and cash equivalents 44.5 26.0Assets held for resale 6.8 - 220.4 167.8 TOTAL ASSETS 826.5 780.0 EQUITYShare capital 3.3 3.2Share premium 18.6 3.4Reserves 26.0 26.0Retained income 171.2 125.2Total equity 219.1 157.8 LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings 407.6 447.0Derivative financial liabilities 0.7 -Retirement benefit obligations 58.9 53.0Provisions for liabilities and charges 1.9 1.7Deferred tax 5.7 6.4 474.8 508.1 Current liabilitiesInterest bearing loans and borrowings 20.0 20.0Derivative financial liabilities 2.5 -Trade and other payables 102.7 87.6Current tax liabilities 7.4 6.5 132.6 114.1 Total liabilities 607.4 622.2 TOTAL EQUITY AND LIABILITIES 826.5 780.0 Group cash flow statementFor year ended 28 February 2006 2006 2005 •m •mCASH FLOWS FROM OPERATING ACTIVITIESProfit attributable to ordinary shareholders 95.8 75.9Finance income (0.9) (0.7)Finance cost 19.5 31.5Income tax expense 8.9 5.6Depreciation of property, plant & equipment 19.6 20.5Profit on disposal of property, plant & equipment (6.6) (3.2)Charge for share-based employee benefits 1.1 0.6Pensions charged to profit less contributions paid (0.4) 2.1Provision movement - IPO costs - (1.4)Provision movement - reorganisation costs - (4.6)Net cash impact of free staff shares - (0.5) 137.0 125.8 Increase in inventories (5.6) (3.6)Increase in trade and other receivables (17.9) (0.1)Increase/(Decrease) in trade and other payables 10.8 (0.9) 124.3 121.2 Interest received 0.9 0.7Interest paid and similar costs (18.5) (26.5)Income taxes paid (8.0) (8.2)Net cash inflow from operating activities 98.8 87.2 CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (24.7) (20.1)Disposal of property, plant and equipment 14.8 11.9Net cash outflow from investing activities (9.9) (8.2) CASH FLOWS FROM FINANCING ACTIVITIESRedemption of ordinary share capital - 0.3Expenses paid in respect of shares issued - (15.2)Bank loans repaid (40.0) (595.2)New bank loans drawn down - 500.0Issue costs paid (0.5) (4.0)Dividends paid (29.9) (17.7)Net cash outflow from financing activities (70.4) (131.8) Net increase/(decrease) in cash & cash equivalents 18.5 (52.8)Cash & cash equivalents at beginning of year 26.0 78.8 Cash & cash equivalents at end of year 44.5 26.0 Group statement of recognised income and expenseFor the year ended 28 February 2006 Income and expense recognised directly in equity: •m •m Exchange difference arising on the net liabilities of foreign operations 0.2 (1.0) Exchange difference arising on the net investment in foreign operations 0.2 (0.5)Movement in cashflow hedging reserve 2.4 -Deferred tax liability on cashflow hedges (0.2) -Actuarial loss on defined benefit pension scheme (6.1) (11.8)Deferred tax - Pension Deficit 1.5 1.4Total income and expense recognised directly in equity (2.0) (11.9) Profit attributable to ordinary shareholders 95.8 75.9Total recognised income and expense for the year attributable toordinary shareholders 93.8 64.0 Impact of first time adoption of IAS 32/39 Cashflow hedges (4.1) N/ADeferred tax arising thereon 0.4 N/A (3.7) N/A Reconciliation of reserves Share Share Capital Capital Hedge Shares Currency Retained Capital premium redemption reserve reserve To be translation earnings Total reserve issued reserve •m •m •m •m •m •m •m •m •m At 28 February 2005 3.2 3.4 0.3 24.9 - 0.6 0.2 125.2 157.8 Impact of adoption of - - - - (3.7) - - - (3.7)IAS 39 At 1 March 2005 3.2 3.4 0.3 24.9 (3.7) 0.6 0.2 125.2 154.1 Total recognised income - - - - 2.2 - 0.4 91.2 93.8and expense for theyearDividend on Ordinary 0.1 15.2 - - - - - (45.2) (29.9)shares Equity settled shared - - - - - 1.1 - - 1.1based payment At 28 February 2006 3.3 18.6 0.3 24.9 (1.5) 1.7 0.6 171.2 219.1 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. Basis of Preparation This preliminary financial information has been derived from the Group'sconsolidated financial statements for the year ended 28 February 2006 which havebeen prepared in accordance with International Financial Reporting Standards(IFRS) as adopted by the EU. The financial information set out in this documentdoes not constitute full statutory accounts for the year ended 28 February 2006.The accounting policies applied in preparing the Group's consolidatedfinancial statements for the year ended 28 February 2006 were as set out in theIFRS transition report, issued on 10 October 2005. The preparation of financial information in conformity with IFRS requires theuse of certain critical accounting estimates. In addition, it requiresmanagement to exercise judgment in the process of applying the Group andCompany's accounting policies. The areas involving a high degree of judgment orcomplexity, or areas where assumptions and estimates are significant to thefinancial information, relate primarily to accounting for defined benefitpension schemes, financial instruments, share-based payments, provisions,goodwill impairment and deferred tax. The estimates and associated assumptionsare based on historical experience and various other factors that are believedto be reasonable under the circumstances, the results of which form the basis ofmaking the judgments about carrying values of assets and liabilities that arenot readily apparent from other sources. The estimates and underlyingassumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognised in the period in which the estimate is revised if the revisionaffects only that period or in the period of the revision and future periods ifthe revision affects both current and future periods. 2. Exceptional items 2006 2005 •m •mRe-organisation costs 9.2 -Profit on disposal of property, plant & equipment (6.6) (3.2)IPO costs - 3.3Pension credit (1.2) - 1.4 0.1 Exceptional finance costs - 9.2Taxation effect on exceptional items (0.4) (2.5) 1.0 6.8 (a) Reorganisation costs The reorganisation costs relate mainly to the outsourcing of production in theSnacks division. (b) Profit on disposal of property, plant & equipment The profit on disposals relate to the disposal of surplus property and plant incontinuing operations arising from: (a) the outsourcing of production in theSnacks division (€4.7m in 2006) and (b) other reorganisations (€1.9m in 2006 and€3.2m in 2005). (c) IPO costs In 2005 an amount of €3.3m was charged to operating profit relating toprofessional fees and other costs incurred on the listing of the Company'sshares on the Irish and UK Stock Markets. (d) Pension credit The exceptional credit of €1.2m arose as a result of the reduction in employeenumbers following the outsourcing of the Snacks production. 3. Segmental Reporting Segment information is present in respect of the Group's business andgeographical segments. The primary format, business segments, is based on theGroup's management and internal reporting structure. The Group analyses its business into four main segments as follows:- Cider This segment includes all Group cider products, with Bulmers in the Republic ofIreland and Magners in all other markets being the two main brands involved. International spirits & liqueurs. This segment consists of four brands, viz. Tullamore Dew, Carolans Irish Cream,Frangelico Liqueur and Irish Mist Liqueur, all of which are marketedinternationally. Soft drinks & snacks. This segment includes all the Group's non-alcoholic drink products which aresold in the Republic of Ireland and Northern Ireland together with the Group'ssnacks products which are sold in the Republic of Ireland. Distribution This segment consists of distribution of wine and spirits, agency products; andthe wholesaling of beer products to the licensed trade in both the Republic ofIreland and Northern Ireland. The analysis by segment includes both items directly attributable to asegment and those that can be allocated on a reasonable basis. Unallocateditems comprise mainly retirement benefit obligations, borrowings and certainexceptional expense items. (a) Class of business analysis 2006 2005 Operating Operating Revenue Profit Assets Liabilities Revenue Profit Assets Liabilities •m •m •m •m •m •m •m •m Cider 278.4 85.3 462.6 (42.3) 212.6 64.8 427.7 (27.8)Internationalspirits &liqueurs 68.8 16.3 75.8 (12.3) 70.1 17.6 70.0 (9.1)Soft drinks & 234.9 17.8 164.8 (40.1) 238.7 24.3 180.1 (42.6)snacksDistribution 234.5 5.3 68.8 (23.0) 229.0 5.7 68.7 (22.7)Total before 816.6 124.7 771.9 (117.7) 750.4 112.4 746.5 (102.2)exceptional items Un-allocated items:Exceptional items - (1.4) - - - (0.1) - -Financial - - 1.0 (3.2) - - - -LiabilitiesPension Deficit - - - (58.9) - - (53.0)Deferred Tax - - 9.1 - - - 7.5 -Group net - - 44.5 (427.6) - - 26.0 (467.0)borrowings 816.6 123.4 826.5 (607.4) 750.4 112.3 780.0 (622.2) (b) Geographical analysis of revenue, assets and liabilities by country of operation 2006 2005 Revenue Assets Liabilities Revenue Assets Liabilities •m •m •m •m •m •mRepublic of Ireland 677.5 729.4 (102.9) 613.5 707.0 (87.1)Rest of the world 139.1 42.4 (14.8) 136.9 39.5 (15.1)Total before unallocated 816.6 771.9 (117.7) 750.4 746.5 (102.2)items (c) Geographical analysis of revenue by country of destination 2006 2005 •m •mRepublic of 540.4 530.2IrelandUK 203.0 147.6Rest of Europe 35.5 27.3North America 32.4 35.9Rest of the world 5.3 9.4Total before 816.6 750.4 Exceptional items 4 Earnings per ordinary share 2006 2005 •m •mEarnings as reported 95.8 75.9Adjustments for exceptional items net of tax (note 2) 1.0 6.8 Earnings adjusted for exceptional items 96.8 82.7 Number Number '000 '000Number of shares at beginning of year 321,130 321,130Shares issued in lieu of dividend 4,074 - Number of shares at end of year 325,204 321,130 Weighted average number of ordinary shares 323,253 321,130Adjustment for the effect of conversion of options 2,357 82 Weighted average number of ordinary shares including options 325,610 321,212 Basic earnings per share Cent CentBasic earnings per share - cent 29.6 23.6Adjusted basic earnings per share - cent 29.9 25.8 Diluted earnings per shareDiluted earnings per share - cent 29.4 23.6Adjusted diluted earnings per share - cent 29.7 25.7 5 Analysis of net debt 28 February Non-cash 28 February 2005 Cash flow Changes 2006 •m •m •m •m Bank loans 467.0 (40.5) 1.1 427.6Cash at bank and in hand (26.0) (18.5) - (44.5) 441.0 (59.0) 1.1 383.1 6 Dividends 2006 2005 •m •mDividends PaidFinal: paid 7.5c per ordinary share in July 2005 24.1 -Interim: paid 6.5c per ordinary share in December 2005(2005: 5.5c paid in December 2004) 21.1 17.7 Total equity dividends 45.2 17.7 Settled as follows:Paid in cash 29.9 17.7Scrip dividend 15.3 - 45.2 17.7 The directors have proposed a final dividend of 8.5 cent per share, which issubject to shareholder approval at the AGM giving a total dividend for the yearof 15.0 cent per share. 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