10th May 2005 07:00
C&C Group Plc10 May 2005 10 May, 2005 C&C GROUP PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR YEAR ENDED 28 FEBRUARY 2005 Dublin, London, 10 May, 2005: C&C Group plc ('C&C' or the 'Group'), the leadingmanufacturer, marketer and distributor of branded beverages and snacks inIreland, today announced results for the year ended 28 February 2005. Financial Highlights • Turnover growth of 4.2%(i) to €750.4 million. • Operating Profit growth of 3.5%(i) to €115.1 million. • Adjusted EPS of 26.4 cent; basic EPS of 15 cent. • Final dividend of 7.5 cent per share; total dividend of 13 cent per share. • Free cash flow of €88 million (66% of EBITDA). • Net debt reduced by €40 million to €441 million. Operating Highlights • The Group's principal brand, Bulmers, increased its share of Irish LAD (ii) market. • Volume of the Group's international cider brand, Magners, increased by 61%. • Tullamore Dew depletions increased by 6%. • Marketing investment of €46 million, increased by 19%. (i) Comparisons are for continuing operations and are based on figuresexcluding exceptional items and amortisation and are on a constant currency basis. (ii) Long Alcohol Drinks (Beer, Cider, RTD's). Performance Highlights Maurice Pratt, C&C Group Chief Executive Officer commented "C&C is pleased toreport progress in line with expectations. Our first annual results as a public,listed company represent a significant milestone in our history. We are equallypleased to report top and bottom line growth in a trading environmentcharacterised by a number of adverse factors. This, we believe, represents aworthy performance and demonstrates the resilience of our business." Investors and analysts Irish Media International Media Mark Kenny or Jonathan Neilan Paddy Hughes or Mark Cahalane 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] Or: [email protected] Full year results for year ended 28 February 2005 C&C is reporting operating profit of €115.1 million an increase of 3.5%(i) onthe previous year The outcome represents an adjusted Earnings Per Share of26.4 cent for the year ended 28 February 2005. C&C generated free cash flow of€88 million in the period. C&C's strategy is to sustain growth, primarily through brand managementexpertise while maintaining strong margins and a high return on capitalemployed. This in turn supports strong cash generation capability and aprogressive dividend policy. The Group's overall performance in 2004/05 reflectsboth the resilience of C&C's business and its defensive characteristics. Dividends The proposed final dividend of 7.5 cent per share will be paid on 11 July 2005to ordinary shareholders registered at the close of business on 20 May 2005. TheGroup's full year dividend will therefore amount to 13 cent per share. A scripdividend alternative will be available subject to shareholder approval. Outlook - Investing for Sustainable Growth The Group's objective is to continue to deliver growth through its brandmanagement skills and leading market positions in growth categories. The favourable prevailing economic conditions in Ireland are expected tocontinue. The anticipated acceleration in consumer spending growth shouldprovide C&C with a positive operating backdrop for its fiscal 2005/06 full year.The Irish on-trade market is likely to see a continuation of the 2004 rate ofdecline until the smoking ban impact on prior year comparatives is eliminated inmid 2005 - thereafter, a significantly slower pace of decline is expected. Strategically, the Group's primary focus is to invest for sustainable growthopportunities presented by Bulmers in Ireland and Magners in the UK. C&C'sobjective is to increase Bulmers' existing share of the Irish LAD market and tobuild upon Magners' initial success by investing in its roll out in the UK. Thegreater London area has been selected for roll out in 2005/06 and the level ofmarketing investment is such that operating profit for the Alcohol division isunlikely to show significant growth in the 2005/06 fiscal year. The Group also plans to enhance growth in International Spirits & Liqueurs byfurther increased investment in Tullamore Dew. The impact of the US Dollardepreciation on the operating profit of this division is expected to amount to€2 million in 2005/06 compared to 2004/05. Within the Soft Drinks & Snacks division, which has yet to see benefit from theeconomic upturn in Ireland, C&C is increasing its marketing focus on growthareas, and in particular is launching a new product in the energy segment of thesoft drinks market in the 2005/06 fiscal year. C&C will also implement measuresto improve productivity in 2005/06. Fiscal year 2005/06 has started satisfactorily with Cider brands showing goodperformance in all markets. The London roll out of Magners, which commenced inMarch 2005, is proceeding to plan. Acquisition of Allied Domecq The recent announcement of a recommended offer by Pernod Ricard S.A. for AlliedDomecq plc may, if successfully completed, have an impact on C&C. Allied Domecq distributes approximately 75% of C&C's International Spirits &Liqueurs volume. We are confident that we can secure alternative distributorsif necessary. However a change could have a short-term disruptive impact. C&C's Distribution business in Ireland (which is part of the Alcohol division)includes distribution of Allied Domecq brands. Agreements for the distributionof these brands expire on 31 January 2006 and it is possible that some or all ofthese may not be renewed. OPERATIONS REVIEW Summary On a comparable basis (i) turnover and operating profit increased by 4.2% and3.5% respectively. Turnover growth was restricted by reduced sales volume to theon-trade, following the introduction of the smoking ban in March 2004, and bythe relatively poor summer weather. Operating profit growth, of 3.5%, principally reflects growth in the Alcoholdivision arising from the success of the Bulmers and Magners brands. Operatingprofit margin declined slightly (by 0.1 point) and principally reflects a 19%increase in marketing investment behind company brands. Operating margins werebroadly maintained in the Alcohol and the International Spirits & Liqueursdivisions but declined in the Soft Drinks & Snacks division. Summary consolidated profit statement (ii) Year ended Year ended Year ended 28 February 2005 29 February 2004 29 February 2004 Reported Restated (I) (ii) Turnover •m 750.4 775.0 720.2Growth % (3.2) 4.2Operating Profit •m 115.1 128.3 111.2Growth (10.3) 3.5Operating Profit Margin % 15.3 16.6 15.4Finance Charges •m (21.6) (50.4)Taxation •m (8.6) (11.5)Earnings •m 84.9 66.4Growth % 27.9 2005 fiscal turnover and operating profit, on a reported basis, declined by 3.2%and 10.3% respectively. These declines reflect the disposal of C&C's Italiansubsidiary Barbero 1891 SpA in December 2003 and the impact of currencydepreciation, principally the US Dollar, on the results of our InternationalSpirits & Liqueurs division. Earnings increased by 27.9% in the year. This increase reflects a decline ininterest charges arising from a reduction in debt as a result of the disposal ofBarbero 1891 SpA and the reduced cost of debt following the refinancing in May2004. (i) Comparisons are for continuing operations on a constant currency basis.(ii) Figures exclude exceptional items and goodwill amortisation DIVISIONAL REVIEW - ALCOHOL Year ended Year ended Year ended Growth 28 February 2005 29 February 2004 29 February 2004 Year-on-Year •m •m (constant currency) (constant currency) •m % Turnover 443.2 410.9 412.9 7.3 - Cider Brands 212.6 193.5 193.7 9.8 - Distribution 230.6 217.4 219.2 5.2Operating Profit 72.4 66.7 66.8 8.4Operating Margin % 16.3 16.2 16.2 Turnover for the Alcohol division increased by 7.3% in the year. This comprisesa 9.8% increase for Cider brands (principally Bulmers and Magners) and a 5.2%increase for Distribution. The ban on smoking in licensed premises in theRepublic of Ireland came into effect on 29 March 2004 and had a significantimpact on the LAD(i) market in the fiscal year. C&C believes that the ban was amajor contributor to the 7%(ii) decline in the on-trade LAD market and 11%(ii)growth in the off-trade LAD market in the 12 months to 28 February 2005. Theoverall LAD market declined by 1% (iii) in the period. The operating margin for the Alcohol division increased by 0.1 point to 16.3% asa result of the improved mix of strong growth in Cider partially offset by adecline in Distribution margins. Sales volume of the division's principal brand Bulmers matched last year andcontinued to increase its share of the overall LAD market. According to Nielsen,Bulmers' share in the on-trade LAD market increased from 9.0% to 9.6% in theperiod while its share of the off-trade LAD market increased from 6.2% to 6.6%. In the year, C&C's international cider brand Magners, significantly increasedits distribution in Great Britain, where the on-trade LAD market is eight timesthe size of Ireland. Sales volume for the brand increased by 61%. In NorthernIreland, Magners' share of the on-trade LAD market increased from 4.0% to 5.4%(ii) in the year to the end of February 2005. During the year Magners'distribution in Scotland was extended beyond the mainly Glasgow region where itwas test marketed in 2003. By 28 February 2005, Magners had achieved 59%(ii)turnover weighted distribution in the on-trade in Scotland. Turnover for Distribution increased by 5.2 % in the period comprising a 1.2%increase in turnover for Wine & Spirits and a 9.9% increase in turnover forAgency brands/Wholesaling. The spirit market declined by 3.4%(ii) in the Republic of Ireland in the year to28 February 2005. This decline reflects the impact of the smoking ban andcontinued weakness in the spirit market following the excise duty increase ofDecember 2002. C&C's volume of spirits, liqueurs and fortified wines declined by3% in the year. The wine market in the Republic of Ireland grew by 9%(iii) in the year to 28February 2005. Growth was concentrated in the off-trade and in New World winesand there was an evident shift towards lower priced wines in the period. C&C'swine volume increased by 3% in the period. In response to changes in the winemarket C&C is streamlining its operations to focus its sales and marketingorganisation and to extend its portfolio to include more value products. The addition of the agency for the Coors Brewers brands in Northern Irelandaccounts for the growth in Agency brands/Wholesaling. (i) Long Alcohol Drinks (Beer, Cider and RTD's)(ii) Nielsen. All market share statistics refer to volume.(iii) Revenue Commissioners DIVISIONAL REVIEW - INTERNATIONAL SPIRITS & LIQUEURS Year ended Year ended Year ended Growth 28 February 2005 29 February 2004 (i) 29 February 2004 Year-on-Year •m •m (constant (constant currency) currency •m % Turnover 68.5 72.8 65.4 4.7Operating Profit 17.6 23.8 16.9 4.1Operating Margin % 25.7 32.7 25.8 Turnover for the International Spirits & Liqueurs division on a constantcurrency basis increased by 4.7% in the year, reflecting shipments volume growthof 7%. The operating margin for the division on a constant currency basis, at 25.7%virtually matched last year. This was achieved despite an increase in marketinginvestment of 19% to support the re-launch of Carolans and the further growth ofTullamore Dew. C&C's premium Irish whiskey brand Tullamore Dew performed particularly well with17% growth in shipments in the year. Depletions(ii) growth in the period was 6%. C&C increased its marketing investment in Tullamore Dew in the year by 15%. Thisreflects the Group's commitment to build international growth brands by focusinginvestment in brands and markets with attractive growth opportunities. C&C's Irish cream liqueur brand, Carolans, was successfully re-launched duringthe year. Shipment growth for Carolans was 4% in the year. Depletions (ii)however are forecast to have declined by 4% in the year. This decline reflectsincreased price competition in the low margin UK market and a disappointingoutturn in the brand's principal market, the USA, where in the Christmas quarterthe overall cream liqueur market was flat. Frangelico, the group's hazelnut liqueur brand had a solid performanceincreasing its sales volume by 4%. During the year C&C completed a €3 million bottling plant investment and as partof this upgrade, C&C repatriated the bottling of Tullamore Dew from IrishDistillers and completed the repackaging of Carolans. These changes improved theDivision's margins. (i) Continuing Operations(ii) Defined as sales by distributors to customers DIVISIONAL REVIEW - SOFT DRINKS & SNACKS Year ended Year ended Year ended Growth 28 February 2005 29 February 2004 29 February 2004 Year-on-Year •m •m (constant currency) (constant currency) •m % Turnover 238.7 240.9 241.9 (1.3)Operating Profit 25.1 27.4 27.5 (8.7)Operating Margin % 10.5 11.4 11.4 Turnover for the Soft Drinks and Snacks Division declined by 1.3% in the year.This performance comprised a 1.7% decline in Soft Drinks' turnover and unchangedSnacks' turnover. Increased marketing investment in support of Club, Club Energise and Ballygowanin Soft Drinks and Tayto and Tayto Honest in Snacks contributed to a 0.9 pointdrop in the division's operating profit margin. Margins in Soft Drinks were adversely affected by the impact of the estimated12% (ii) volume decline in the on-trade soft drinks market. This performancereflects the impact of the smoking ban on the on-trade and the decline in softdrinks mixer usage corresponding to a decline in spirit sales. Production of a portion of the Snacks' product range was outsourced in October2003, and this enhanced operating margins in the Snacks business. The soft drinks market (i) declined by 2.2% in the year reflecting, in part,unseasonal summer weather and the secular decline in Carbonated Soft Drinks.Bottled water, sport and energy drinks and cordials continue to show growth. C&C's overall soft drinks volume (which includes Northern Ireland) declined by3.1% in the year. This represented a decline of approximately 0.3 point inmarket share in the Republic of Ireland. This decline principally reflects adecline in the Water sub-category and was concentrated in the grocery multiplechannel. C&C recorded strong growth for the Club Energise Sport brand (launched in 2003)and for the MiWadi brand in the cordial category. The overall savoury snacks market was flat in the year. This comprised growth incrisps products and a decline in snacks. C&C maintained market share in the keycrisps category but experienced a decline in the snacks category. During the year C&C launched the Honest range of snacks to meet consumer needsfor healthier offerings. The product has been well received and has achieved asatisfactory niche position in the crisps and popcorn categories. (i) Carbonated soft drinks/bottled water for Republic of Ireland per the Beverage Council of Ireland (ii) Nielsen FINANCE REVIEW Cash Flow Free cash flow of €88 million for the year represented 66% of EBITDA - ahead ofthe Group's medium term target of 60%. This performance reflects the relativelylow net capital expenditure during the year. Re-organisation costs, paid in theyear, principally relate to a logistics integration programme commenced andprovided for in the previous year. A summary Cash Flow for the year ended 28 February 2005 is set out below: Year ended Year ended 28 February 2005 29 February 2004 •m •m Operating Profit (i) 115.1 128.3Depreciation 18.3 18.7EBITDA 133.4 147.0Net Capital Expenditure (5.5) (7.9)Working Capital (5.1) 6.4Operating Cash Flow 122.8 145.5Re-Organisation Costs (4.6) (6.5)Fire Insurance Proceeds - 16.0Finance Charges (ii) (22.0) (42.2)Taxation Payments (8.2) (13.6)Free Cash Flow (FCF) 88.0 99.2FCF/EBITDA 66% 67% (i) Before exceptional items and goodwill amortisation and including discontinued operations in 2004 (ii) Excluding IPO related finance costs Net Capital Expenditure Net capital expenditure for the period of €5.5 million comprised gross capitalexpenditure of €17.4 million and asset disposals of €11.9 million. The maincomponents of the gross spend included a plant upgrade for International Spirits& Liqueurs' bottling, a warehouse extension in Belfast, expenditure on salesinfrastructure (coolers and dispensers for soft drinks), compliance with legalrequirements on traceability, effluent etc., and a general replacement/upgradeof plant. Disposals mainly comprised sales of warehouses in Belfast, Limerick, Cork andGalway and arose from a logistics integration programme. Finance Charges The reduction in finance charges is due to reduced debt arising from theproceeds of the disposal of C&C's Italian subsidiary Barbero 1891 SpA inDecember 2003 and from a refinancing of debt in May 2004. Interest rates (excluding margin) applying to debt for the May 2004 to February2005 period averaged 2.1%. Future interest rate exposure is partially hedged atthe following interest rates (excluding margin): Fiscal year 2006 €300 million hedged at 3.35%Fiscal year 2007 €250 million hedged at 3.37%Fiscal year 2008 €150 million hedged at 3.46% Taxation The tax charge for the year represents an effective tax rate on profit beforeexceptional items of 10.6% less a credit for excess provision in previousperiods of €1.3 million. Exceptional Costs The total cost of the Initial Public Offering (IPO) of the Group's shares on theDublin and London Stock Exchanges, which took place in May 2004, was borne bythe Group and amounted to €28.8 million (including €9.2 million relating to therefinancing of existing debt). €15.2 million of the total cost has beenaccounted for as share issue costs and has been charged against the sharepremium account. The costs have been accounted for as follows: Total P&L Net Share P&L Feb '05 Premium Feb '04 •m •m •m •m Underwriting & other costs 19.6 3.3 15.2 1.1Hedge settlement costs 3.8 3.8 - -Unamortised debt costs written off 5.4 5.4 - -Total 28.8 12.5 15.2 1.1 Net Debt Net debt at 28 February 2005 amounted to €441 million. The movement in net debtbetween 1 March 2004 and 28 February 2005 is outlined below. At 28 February2005, EV gearing (net debt/market capitalisation plus net debt) was 31%. Netinterest charge was covered 6.2 times by EBITDA before exceptional items. •mNet Debt at 1 March 2004 481.1Free Cash Flow in Period (88.0)Exceptional IPO Costs 28.8Dividends Paid 17.7Other 1.4Net Debt at 28 February 2005 441.0 Foreign Exchange Exchange rate movements in the year adversely affected operating profit by €6.7million. This is made up of a loss in the International Spirits & Liqueursdivision arising from transaction exposure to the US Dollar and Canadian Dollar(€6.9 million) and a gain arising from translation exposure to Sterling (€0.2million). Pensions Financial statements up to and including 28 February 2005 are prepared inaccordance with SSAP 24 in relation to pensions. The application of FRS17 wouldhave the effect of creating an additional charge to profits of €2.1 million inthe year and of bringing the pension fund deficit (net of tax) of €45.6 milliononto the Balance Sheet at 28 February 2005. On conversion to InternationalFinancial Reporting Standards, IAS19 will have an impact in C&C's 2006 fiscalyear similar to FRS17. Transition to International Financial Reporting Standards All EU companies listed on an EU Stock Exchange will be required to report theirconsolidated accounts in accordance with International Financial ReportingStandards (IFRS) for accounting periods starting after 1 January 2005. C&C willtherefore report its interim results for 6 months to 31 August 2005 under IFRS. C&C's preparations for the adoption of IFRS are well advanced. Apart from theeffect on pensions outlined above, we estimate that the principal changes to theProfit and Loss account will relate to: 1. elimination of the charge (€30 million) for goodwill amortisation in the P&L Account; and 2. the introduction of an expense for share options granted - estimated at €1 million for fiscal year 2006. These changes will have no impact on cash and accordingly will not impactdividends. Further guidance will be given during the year as necessary, in particular tothe effect new Standards will have when adopted. 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; for translation in relation to the Group Sterlingdenominated subsidiaries; and with comparable classifications in relation tocentral warehousing and other costs. The reconciliation to reported figures isoutlined below. Previously Reclassification Restated Discontinued FX FX Year to Reported Year to Operations Translation Transaction 29 Feb '04 Year to 29 Feb '04 Comparative 29 Feb'04 •m •m •m •m •m •m •m Turnover Alcohol 415.7 (4.8) 410.9 - 2.0 - 412.9 International 127.5 (4.3) 123.2 (50.4) - (7.4) 65.4 Soft drinks & 238.5 2.4 240.9 - 1.0 - 241.9 snacks Total 781.7 (6.7) 775.0 (50.4) 3.0 (7.4) 720.2 Operating Profit(before goodwillamortisation) Alcohol 66.7 - 66.7 - 0.1 - 66.8 International 34.2 - 34.2 (10.4) - (6.9) 16.9 Soft drinks & 27.4 - 27.4 - 0.1 - 27.5 snacks Total 128.3 - 128.3 (10.4) 0.2 (6.9) 111.2 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 Profit and Loss accountYear ended 28 February 2005 Year ended Year ended 28 February 2005 29 February 2004 (as restated) Before Goodwill Before Goodwill, goodwill and goodwill, exceptional exceptional and exceptional items and items exceptional items and discontinued items discontinued operations •m Total operations Total •m •m •m •m •mTurnover- continuing operations 750.4 - 750.4 724.6 - 724.6- discontinued operations - - - - 50.4 50.4 750.4 - 750.4 724.6 50.4 775.0 Operating costs (635.3) - (635.3) (606.7) (40.0) (646.7)IPO related transaction costs - (3.3) (3.3) - (1.1) (1.1)Free shares to be issued to employees - - - - (22.0) (22.0)Amortisation of goodwill - continuing - (29.8) (29.8) - (29.8) (29.8)Amortisation of goodwill - discontinued - - - - (0.8) (0.8) Operating profit- continuing operations 115.1 (33.1) 82.0 117.9 (52.9) 65.0- discontinued operations - - - - 9.6 9.6 115.1 (33.1) 82.0 117.9 (43.3) 74.6Exceptional items Profit on sale of subsidiary - - - - 116.9 116.9 Reorganisation costs - - - - (10.9) (10.9) Profit/(loss) on disposal of fixed - 3.2 3.2 - (4.7) (4.7) assets Profit on ordinary activities before 115.1 (29.9) 85.2 117.9 58.0 175.9interest Net interest payable and similar (21.6) (9.2) (30.8) (50.4) - (50.4)charges Profit on ordinary activities before 93.5 (39.1) 54.4 67.5 58.0 125.5tax Tax on profit on ordinary activities (8.6) 2.5 (6.1) (7.4) (2.6) (10.0) Profit attributable to ordinary 84.9 (36.6) 48.3 60.1 55.4 115.5shareholders Dividends - paid (17.7) - (17.7) - - -Dividends - proposed (24.1) - (24.1) - - - Profit retained for the financial year 43.1 (36.6) 6.5 60.1 55.4 115.5 Basic earnings per ordinary share Cent Cent Cent Cent - After exceptional items and goodwill amortisation 15.0c 36.0c - Before exceptional items and goodwill amortisation 26.4c 18.7c Diluted earnings per ordinary share - After exceptional items and goodwill amortisation 15.0c 36.0c - Before exceptional items and goodwill amortisation 26.4c 18.7c Other Group StatementsYear ended 28 February 2005 Statement of total recognised gains and losses 2005 2004 •m •m Profit attributable to ordinary shareholders 48.3 115.5Currency translation reserve movement (0.5) 0.4 Total recognised gains and losses for the year 47.8 115.9 Movements on profit and loss account 2005 2004 •m •m At the beginning of year 112.9 (3.0)Profit retained for the financial year 6.5 115.5Transfer to capital redemption reserve fund (0.3) -Currency translation reserve movement (0.5) 0.4 Balance at end of year 118.6 112.9 Reconciliation of movements in shareholders' funds 2005 2004 •m •m Total recognised gains and losses for the year 47.8 115.9 Transactions with shareholdersCancellation of convertible shares (0.3) -New shares issued on IPO 423.0 -Shares redeemed following IPO (422.7) -Free shares issued to employees 21.3 -Share issue costs incurred (15.2) -Dividends - paid (17.7) -Dividends - proposed (24.1) - Net movement 12.1 115.9 Shareholders' funds at beginning of year 138.3 22.4Shareholders' funds at end of year 150.4 138.3 Group Balance Sheet 2005 2004As at 28 February 2005 •m •m Fixed assetsIntangible assets - goodwill 432.0 461.8Tangible fixed assets 138.5 144.1 570.5 605.9 Current assetsStocks 55.0 51.7Debtors 91.1 96.2Cash at bank and in hand 26.0 78.8 172.1 226.7 Creditors: amounts falling due within one year (141.0) (161.6) Net current assets 31.1 65.1 Total assets less current liabilities 601.6 671.0 Creditors: amounts falling due after more than one year (447.0) (507.0) Provisions for liabilities and charges (4.2) (25.7) Net assets 150.4 138.3 Capital and reservesShare capital 3.2 0.5Share premium 3.4 -Capital redemption reserve fund 0.3 -Capital reserve and merger reserve 24.9 24.9Profit and loss account 118.6 112.9 Shareholders' funds - equity 150.4 138.3 Group cash flow statement 2005 2004Year ended 28 February 2005 •m •m Net cash inflow from operating activities: Group operating profit 82.0 74.6Goodwill amortisation 29.8 30.6Depreciation of tangible fixed assets 18.3 18.7Provision movement re IPO costs (1.4) 0.8Net cash impact of free staff shares (0.5) 22.0Fire claim costs - 6.3Exceptional reorganisation costs paid (4.6) (6.5)Increase in stocks (3.5) (0.7)Increase in debtors (0.1) (2.6)(Decrease)/increase in creditors (0.9) 9.6Exchange difference (0.6) 0.1 118.5 152.9 Returns on investments and servicing of finance:Interest received 0.7 1.2Interest paid and similar costs (26.5) (43.4) (25.8) (42.2) Taxation paid (8.2) (13.6) Capital expenditure and financial investment:Purchase of tangible fixed assets (17.4) (10.1)Disposal of tangible fixed assets 11.9 2.2Insurance proceeds received on fixed assets destroyed in fire - 9.7 (5.5) 1.8Disposals:Disposal of subsidiary undertakings - 215.9Net cash disposed - (73.0) - 142.9 Equity dividends paid (17.7) - Net cash flow before financing 61.3 241.8 Group cash flow statement (continued) 2005 €2004 •m •m Financing:Net issue and redemption of share capital 0.3 -Expenses paid in respect of shares issued (15.2) -Bank loans repaid (595.2) (190.3)New bank loans drawn down 496.0 - (114.1) (190.3) (Decrease)/increase in cash in the year (52.8) 51.5 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash (52.8) 51.5Net repayment of bank loans 99.2 190.3 Reduction in net debt resulting from cashflow 46.4 241.8 Roll-up of deferred interest - (3.8)Loan issue costs written off in year (6.3) (4.2) Net movement 40.1 233.8Net debt at beginning of year (481.1) (714.9) Net debt at end of year (441.0) (481.1) Segmental analysis reportYear ended 28 February 2005 (a) Prior year adjustments As a result of adopting a new accounting policy relating to the treatment ofallowances given to customers in respect of central warehousing and other costs,the turnover and net operating expenses for the previous financial year havebeen amended. In previous years, the Group accounted for the cost of these allowances asoperating expenses whereas the current policy is to account for them asdiscounts and therefore as a reduction to turnover. This change had no impacton the reported profit in any period or on the financial position (net assets)of the Group as reported. The impact of the change on turnover and net operating expenses on continuingoperations in both years is shown below: 2005 2004 Net Turnover Net operating Operating (as operating Operating Turnover expenses profit restated) expenses profit •m •m •m •m •m •m Under previous policy 757.2 (642.1) 115.1 731.3 (613.4) 117.9Impact of change (6.8) 6.8 - (6.7) 6.7 - Restated under revised policy 750.4 (635.3) 115.1 724.6 (606.7) 117.9 (b) The segmental analysis of turnover, operating profits and net assets is as follows: 2005 2004 TurnoverClass of business analysis Turnover Operating Net (as Operating Net profits assets restated) profits Assets •m •m •m •m •m •m Alcohol 443.2 72.4 94.3 410.9 66.7 95.1International spirits & liqueurs 68.5 17.6 12.4 72.8 23.8 14.7Soft drinks & snacks 238.7 25.1 77.1 240.9 27.4 77.6 Total continuing operations 750.4 115.1 183.8 724.6 117.9 187.4Discontinued operations - - - 50.4 10.4 - 750.4 115.1 183.8 775.0 128.3 187.4 Unallocated goodwill/amortisation - (29.8) 432.0 - (30.6) 461.8 Unallocated IPO preparation costs - (3.3) - - (1.1) (1.1) Free shares to employees - - - - (22.0) (22.0)Group net borrowings - - (441.0) - - (481.1)Unallocated liabilities - - (24.4) - - (6.7) Total 750.4 82.0 150.4 775.0 74.6 138.3 Segmental analysis report (continued) Geographical analysis by country of operation 2005 2004 Turnover Turnover Operating Net assets (as Operating Net assets profits restated) profits •m •m •m •m •m •m Republic of Ireland 613.5 115.2 173.2 609.7 115.9 176.6Rest of World 136.9 (0.1) 10.6 114.9 2.0 10.8Unallocated items - (33.1) (33.4) - (53.7) (49.1) Total continuing operations 750.4 82.0 150.4 724.6 64.2 138.3Discontinued operations - - - 50.4 10.4 - Total 750.4 82.0 150.4 775.0 74.6 138.3 Geographical analysis by country of destination 2005 2004 •m •m Republic of Ireland 530.2 525.4UK 147.6 126.8Rest of Europe 27.3 21.4North America 35.9 37.1Rest of World 9.4 13.9 Total continuing operations 750.4 724.6Discontinued operations - 50.4 Total 750.4 775.0 The discontinued amounts relate to an Italian subsidiary Barbero 1891 SpA whichwas sold in December 2003. Notes to the preliminary announcement 1. Basis of preparation The accounting policies applied to the preparation of the preliminaryannouncement are consistent with the accounting policies as set out in thefinancial statements for the year ended 29 February 2004, with the exceptionthat during the current financial year the Group implemented a new policywhereby allowances given to customers in respect of central warehousing andother costs, which were previously treated as operating costs, are now nettedagainst turnover. The turnover and net operating expenses as reported in theprevious financial year have been restated accordingly, as set out in thesegmental analysis report. 2. Exceptional items 2005 2004 •m •m (a) (Profit) on sale of subsidiary - (116.9) During the previous year the Group disposed of an Italian subsidiary company, Barbero 1891 SpA. (b) Reorganisation costs - 10.9 Reorganisation costs provided for in the previous year related to the costs of a fundamentalreorganisation of the Group's Snacks operations and restructuring of operations in certain othertrading subsidiaries. (c ) (Profit)/loss on disposal of fixed assets (3.2) 4.7 The (profit)/loss on disposals relates to the disposal of surplus property and plant arising fromreorganisations in continuing operations. (d) Free shares to employees - 22.0 Free shares to the value of €22m (inclusive of associated costs) were issued to Group employees tocoincide with the Initial Public Offering of the Company's shares in May 2004. The cost of the shareshad been provided for in the previous year. (e) IPO Costs 3.3 1.1 In arriving at Group operating profit for the year, an amount of €3.3m was charged relating toprofessional fees and other costs incurred in connection with the Initial Public Offering which tookplace in May 2004 (2004: €1.1m). The tax effect of these exceptional items is a net credit of €2.5m (2004: €1.5m). 3. Earnings per ordinary share 2005 2004 •m •m Earnings as reported 48.3 115.5 Adjustment for discontinued activities / exceptional items net of tax 6.8 (85.2)Adjustment for goodwill 29.8 29.8 Earnings adjusted for exceptional items and goodwill 84.9 60.1 Number Number '000 '000 Number of shares at beginning of year (adjusted) 321,130 321,130Adjustment for the effect of conversion of options 788 - Weighted average number of ordinary shares 321,918 321,130 Basic earnings per shareBasic earnings per share - cent 15.0 36.0Adjusted earnings per share - cent 26.4 18.7 Diluted earnings per shareBasic earnings per share - cent 15.0 36.0Adjusted earnings per share - cent 26.4 18.7 The opening number of issued ordinary shares have been adjusted to include allshares issued during the year without any corresponding increase in resources.In calculating the weighted average number of shares these have been treated asif they were in issue for the entire current and prior years. Share options totalling 4.9 million shares were granted on 19 May 2004 under theterms of the Executive Share Option Scheme. The options were granted at theinitial listing share price of €2.26 per share and are subject to achievement ofcertain performance criteria relating to growth in earnings per share. 4.Dividends 2005 2004 •m •mPaidInterim dividend of 5.5c per ordinary share 17.7 - ProposedFinal dividend of 7.5c per ordinary share 24.1 - Total equity dividends 41.8 - 5. Analysis of net debt 29 February 2004 Cash Non-cash changes 28 February 2005 •m flow •m •m •m Cash at bank and in hand (78.8) 52.8 - (26.0)Bank loans 559.9 (99.2) 6.3 467.0 481.1 (46.4) 6.3 441.0 6. Pensions At the 28 February 2005 the Group's defined benefit pension schemes had a netdeficit calculated in accordance with FRS 17 Retirement Benefits of €45.6m(2004: €31.9m). As allowed under the current Irish/UK Generally AcceptedAccounting Standards on which the preliminary announcement has been preparedthis deficit has not been provided for in the Group's balance sheet. This announcement has been issued through the Companies Announcement Service of the Irish Stock Exchange. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
C&C Group