The Group’s net revenue increased 7.8% on a constant currency^(iv) basis. Excluding the impact of IFRS 16 Leases, operating profit⁽ⁱ⁾ increased 10.4% on a constant currency basis^(iv) and adjusted diluted EPS⁽ⁱⁱ⁾ of 29.4 cent increased 10.5% delivering on our double digit EPS growth target. Basic EPS of 2.8 cent was impacted by the exceptional items as outlined in further detail below.

Cash generation was very strong at over 100%⁽ⁱⁱⁱ⁾ resulting in a Net Debt^(vi)/EBITDA^(vii) position at year end of 1.77x excluding Leases, which aligns with our banking covenant definition which excludes leases, or 2.13x including Leases.

The key financial performance indicators are set out on page 12.

The COVID-19 pandemic is having a significant impact on our business and we are proactively taking measures to reduce operating costs, maximise available cash flow, and maintain and strengthen the Group’s liquidity position.

In March 2020, the Group announced the successful issue of approximately €140 million of new US Private Placement (‘USPP’) notes. The unsecured notes have maturities of 10 and 12 years and diversify the Group’s sources of debt finance. The Group’s Euro term loan included a mandatory prepayment clause from the issuance of any Debt Capital Market instruments. A waiver of the prepayment was successfully negotiated post year end. The Group also received a waiver on its debt covenants from its lending group for FY2021, to be replaced by a minimum liquidity covenant and monthly gross debt cap.

The Group has also received confirmation from the Bank of England that it is eligible to issue commercial paper under the COVID-19 Corporate Financing Facility (‘CCFF’’) scheme. The Group had not drawn down on this facility as at 3 June 2020.

Given the absolute focus on liquidity with the high levels of uncertainty, the Group will not declare a final dividend for the current financial year.

Accounting Policies

As required by European Union (‘EU’) law, the Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and as applied in accordance with the Companies Act 2014, applicable Irish law and the Listing Rules of the UK Listing Authority. Details of the basis of preparation and the accounting policies are outlined on pages 111 to 125. The Group has adopted IFRS 16 Leases from 1 March 2019 and the impact of same is disclosed on page 112.

Finance Costs, Income Tax and Shareholder Returns

Net finance cost was €19.8 million for the year including IFRS 16 Leases. Excluding the impact of IFRS 16 Leases net finance costs were €16.3 million (FY2019: €15.6 million). The Group’s Euro term loan was only drawn down in July last year as was the extension of the Group’s receivables purchase programme to include Matthew Clark and Bibendum receivables. Costs associated with both increased year on year due to the fact they were in place for the full 12 month period.

The income tax charge in the year was €12.3 million excluding the credit in relation to exceptional items and equity accounted investments’ tax charge. This also includes a charge of €0.3 million with respect to IFRS 16 Leases. Excluding IFRS 16 Leases, the credit in relation to exceptional items and the equity accounted investments’ tax charge the income tax charge in the year was €12.0 million. This represents an effective tax rate of 12.0%^(v) reflecting a decrease of 0.1 percentage points on the prior year. Included within the effective tax rate is a net benefit of €2.9 million arising from an internal re-organisation. This benefit is made up of a current period tax charge offset mainly by deferred tax assets on future tax deductions. Excluding the impact of this reorganisation, the Group’s effective tax rate would have been 14.9%^(v).The Group is established in Ireland and as a result it benefits from the 12.5% corporate tax rate on profits generated in Ireland. Excluding the impact of the reorganisation, the effective tax rate is higher than the standard corporate tax rate of 12.5% for the Group mainly as a result of a higher proportion of profits subject to taxation coming from outside of Ireland. The Group’s effective tax rate is subject to a number of factors, such as local and international tax reform including the OECD’s Base Erosion and Project Shifting project “BEPS”, EU directives and initiatives and the consequences of Brexit. In any given financial year the effective tax rate reflects a variety of factors that may not be present in subsequent financial years and may be affected by changes in profit mix, challenges brought by tax authorities, amendments in tax law, guidance and related interpretations.

The Group paid an interim dividend of 5.50 cent per share but as noted previously will not declare a final dividend. Total dividends to ordinary shareholders in FY2020 amounted to €48.1 million, of which €29.7 million was paid in cash, €18.1 million or 37.6% (FY2019: 20.2%) was settled by the issue of new shares and €0.3 million (FY2019: €0.3 million) was accrued with respect to LTIP 2015 dividend entitlements.

In addition to increased dividends, we invested €22.7 million (€23.0 million including commission and related costs) in market share buybacks, to minimise the dilutive impact of scrip dividends, purchasing 5,625,000 of our own shares at an average Euro equivalent price of €4.03. Our stockbrokers, Davy, conducted the share buyback programme. All shares acquired during the current financial year were subsequently cancelled.

During the period, the Group took the decision to seek admission to the FTSE UK Index Series. This was deemed the most appropriate action based on a number of factors. Following the acquisition of Matthew Clark and Bibendum in 2018 the majority of the Group’s revenues, earnings and activities are now derived in and from the United Kingdom (“UK”). The continued evolution of our shareholder base now results in the majority of the Group’s shares being held by shareholders based in the UK and North America and the Group believes that over time the change in listing will increase awareness of the Group among the investor community. The move entailed cancelling the Group’s listing on the Official List of Euronext Dublin on 7 October 2019. From that date, C&C shares are traded solely on the London Stock Exchange in Sterling. The Group is listed on the premium segment of The London Stock Exchange and was included in the FTSE All-Share Index and the FTSE 250 indices in December 2019.

Exceptional items 

Total exceptional items, pre the impact of taxation, of €92.5 million were incurred in the financial year.

COVID-19

The Group has accounted for the COVID-19 pandemic as an adjusting event in the current financial year and has incurred an exceptional charge of €47.6 million at 29 February 2020 in this regard. In light of the closure of on-trade premises in both Ireland and the UK, the Group reviewed its recoverability of its debtor book and advances to customers and booked an expected credit loss provision directly associated with COVID-19 of €19.4 million and €5.8 million respectively. The Group also reviewed its stock balances and in particular stock that was due to expire in the short to medium term and booked a provision of €10.6 million. The balance of €11.8 million relates to trade and marketing contracts now deemed to be onerous €9.4m and the write off of an IT intangible asset where the project will now not be completed, as a direct consequence of COVID-19, of €2.4m.

Impairment of intangible assets

The Group impaired the Woodchuck suite of brands by €34.1 million at 29 February 2020. The success of the relatively new Hard Seltzers’ category has squeezed the Cider and other categories and resulted in less space being available for our brands. In the short and medium term the outlook is not positive for growth in Cider in the US and the COVID-19 crisis and linked restrictions has further impacted our ability to innovate and trade our way back to sustainable profit growth.

An impairment of €0.1m was also taken with respect to the Group’s Matthew Clark Bibendum cash generating unit directly attributable to a discontinued brand.

Other

Other exceptional items in the current financial year include €4.4 million for the termination of a number of the Group’s long term apple contracts which were deemed surplus to requirements; restructuring costs of €3.0 million primarily relating to restructuring following the prior year acquisition of Matthew Clark and Bibendum, incremental costs related to the dual running of warehouse management systems in Scotland due to system implementation delays of €0.6 million, acquisition related costs of €0.2 million and a €1.0 million revaluation loss following an external valuation of property, plant & equipment. A net gain arising from the same revaluation exercise of €1.1m was accounted for within Other Comprehensive Income.

During the current financial year, the Group disposed of its equity accounted investment in a Canadian company for cash proceeds of €6.1 million, realising a profit of €2.6 million on disposal. Also during the current financial year, the Group disposed of its investment and non-controlling interest Peppermint Events Limited at a loss of €1.7 million.

Equity accounted investments’ exceptional items

Property within Admiral Taverns are valued at fair value on the Balance Sheet, the result of the fair value exercise at 29 February 2020 resulted in a revaluation loss (the Group’s share of this loss equated to €2.7 million) accounted for in the Income Statement and a gain (the Group’s share of this gain equated to €3.7 million) accounted for within Other Comprehensive Income.

Also during the current financial year, the Group invested a further €10.7 million which gave rise to capital duties to be expensed in relation to the acquisition (the Group’s share of this expense was €2.9 million). This was offset by recognition of the Group’s share of an adjustment made by the investee to recognise a higher deferred tax asset in respect of timing differences on fixed assets in respect of prior years (the Group’s share of this gain was €3.2 million).

Balance Sheet Strength, Debt Management and Cashflow Generation

Balance sheet strength provides the Group with the financial flexibility to pursue its strategic objectives. It is our policy to ensure that a medium/long-term debt funding structure is in place to provide us with the financial capacity to promote the future development of the business and to achieve its strategic objectives. 

In July 2018, the Group amended and updated its committed €450 million multi-currency five year syndicated revolving loan facility and executed a three year Euro term loan. Both the multi-currency facility and the Euro term loan were negotiated with eight banks, namely ABN Amro Bank, Allied Irish Bank, Bank of Ireland, Bank of Scotland, Barclays Bank, HSBC, Rabobank, and Ulster Bank. During the current financial year, the Group availed of an option within the Group’s multi-currency revolving loan facility agreement to extend the tenure for a further 364 days from termination date. The multi-currency facility agreement is therefore now repayable in a single instalment on 11 July 2024. The Euro term loan is repayable in instalments, with the last instalment payable on 12 July 2021.

As noted previously, in March 2020, the Group completed the successful issue of approximately €140 million of new US Private Placement (‘USPP’) notes. The unsecured notes have maturities of 10 and 12 years and diversify the Group’s sources of debt finance. The Group’s Euro term loan included a mandatory prepayment clause from the issuance of any Debt Capital Market instruments. A waiver of the prepayment was successfully negotiated post year end in addition to a waiver of a July 2020 term loan repayment which now becomes payable with the last instalment in July 2021. The Group also received a waiver on its debt covenants from its lending group for FY2021, to be replaced by a minimum liquidity covenant and monthly gross debt cap.

The Group has also received confirmation from the Bank of England that it is eligible to issue commercial paper under the COVID-19 Corporate Financing Facility (‘CCFF’’) scheme. The Group had not drawn down on this facility as at 3 June 2020.

The Euro term loan and multi-currency revolving facilities agreement provides for a further €100 million in the form of an uncommitted accordion facility.

At 29 February 2020 net debt^(vi) excluding leases capitalised under IFRS 16 which is the basis for debt covenant calculations, was €233.6 million, representing a net debt^(vi):EBITDA^(vii) ratio of 1.77x. Net debt^(vi) to EBITDA^(vii) including IFRS 16 Leases was €326.9 million, representing a net debt^(vi):EBITDA^(vii) ratio of 2.13x.

Cash generation

Management reviews the Group’s cash generating performance by measuring the conversion of EBITDA^(vii) to Free Cash Flow⁽ⁱⁱⁱ⁾ as we consider that this metric best highlights the underlying cash generating performance of the continuing business.

The Group’s performance during the year resulted in an EBITDA^(vii) to Free Cash Flow⁽ⁱⁱⁱ⁾ conversion ratio pre-exceptional costs of 101.0%. Excluding the impact of IFRS 16 Leases, the Free Cash Flow conversion ratio pre-exceptional costs would have been 103.5%. The Group’s year end cash position benefited from the Group’s receivables purchase programme which contributed €131.4 million (2019: €152.6 million) to year end cash. A reconciliation of EBITDA^(vii) to operating profit⁽ⁱ⁾ is set out below.

Table 1 – Reconciliation of EBITDA^(vii) to Operating profit⁽ⁱ⁾

	2020 (Including IFRS 16)	2020 (Excluding IFRS 16)	2019
	€m	€m	€m
Operating profit	29.8	25.4	96.7
Exceptional items	91.0	91.0	7.8
Operating profit before exceptional items	120.8	116.4	104.5
Amortisation and depreciation charge	32.8	15.5	15.5
Adjusted EBITDA(vii)	153.6	131.9	120.0

Table 2 – Cash flow summary

	2020 (Including IFRS 16)	2020 (Excluding IFRS 16)	2019
	€m	€m	€m
Adjusted EBITDA(vii)	153.6	131.9	120.0
Working capital	47.9	47.6	19.9
Advances to customers	(4.2)	(4.2)	(0.9)
Net finance costs	(17.4)	(14.0)	(12.5)
Tax paid	(8.0)	(8.0)	(8.6)
Pension contributions paid	(0.4)	(0.4)	(0.2)
Tangible/intangible IT expenditure	(19.8)	(19.8)	(22.1)
Disposal proceeds property plant & equipment	0.4	0.4	0.1
Exceptional items paid	(9.5)	(9.5)	(5.9)
Other*	3.0	3.0	1.2
Free cash flow(iii)	145.6	127.0	91.0
Free cash flow(iii) conversion ratio	94.8%	96.3%	75.8%
Free cash flow(iii)	145.6	127.0	91.0
Exceptional cash outflow	9.5	9.5	5.9
Free cash flow(iii) excluding exceptional cash outflow	155.1	136.5	96.9
Free cash flow(iii) conversion ratio excluding exceptional cash outflow	101.0%	103.5%	80.8%
Reconciliation to Group Condensed Cash Flow Statement
Free cash flow(iii)	145.6	127.0	91.0
Net proceeds from exercise of share options/equity Interests	0.4	0.4	-
Shares purchased under share buyback programme	(23.0)	(23.0)	(1.9)
Drawdown of debt	192.6	192.6	736.0
Repayment of debt	(280.7)	(280.7)	(786.2)
Payment of Lease liabilities	(18.6)	-	-
Payment of issue costs	(0.5)	(0.5)	(5.0)
Disposal of subsidiary/equity investment	5.1	5.1	-
Cash outflow re acquisition of equity accounted investments	(11.2)	(11.2)	-
Dividends paid	(29.7)	(29.7)	(36.0)
Net decrease in cash	(20.0)	(20.0)	(2.1)

* Other relates to share options add back, pensions debited to operating profit and net profit on disposal of property, plant & equipment.

Retirement Benefits

In compliance with IFRS, the net assets and actuarial liabilities of the various defined benefit pension schemes operated by the Group companies, computed in accordance with IAS 19® Employee Benefits, are included on the face of the Balance Sheet as retirement benefits.

Independent actuarial valuations of the defined benefit pension schemes are carried out on a triennial basis using the attained age method. The most recent actuarial valuations of the ROI defined benefit pension schemes were carried out with an effective date of 1 January 2018 while the date of the most recent actuarial valuation of the NI defined benefit pension scheme was 31 December 2017. As a result of these updated valuations the Group has committed to contributions of 27.5% of pensionable salaries for the Group’s staff defined benefit scheme. There is no funding requirement with respect to the Group’s Executive defined benefit pension scheme or the Group’s NI defined benefit pension scheme, both of which are in surplus. The Group has an unconditional right to these surpluses when the scheme concludes.

There are 2 active members in the NI scheme and 55 active members (less than 10% of total membership) in the ROI staff defined benefit pension scheme and no active members in the executive defined benefit pension scheme. 

At 29 February 2020, the retirement benefits computed in accordance with IAS 19(R) Employee Benefits amounted to a net deficit of €7.9 million gross of deferred tax (€16.7 million deficit with respect to the Group’s staff defined benefit pension scheme, €3.3 million surplus with respect to the Group’s Executive defined benefit pension scheme and a €5.5 million surplus with respect to the Group’s NI defined benefit pension scheme) and a net deficit of €8.1 million net of deferred tax (FY2019: net deficit of €3.2 million gross and net deficit of €4.1 million net of deferred tax). 

The key factors influencing the change in valuation of the Group’s defined benefit pension scheme obligations gross of deferred tax are as outlined below:

	€m
Net deficit at 1 March 2019	(3.2)
Employer contributions paid	0.4
Charge to Other Comprehensive Income	(4.4)
Charge to Income Statement	(0.7)
Net deficit at 29 February 2020	(7.9)

The increase in the deficit from €3.2 million at 28 February 2019 to a deficit of €7.9 million at 29 February 2020 is primarily due to an actuarial loss of €4.4 million over the year. The actuarial loss was driven by the reduction in the discount rates used to value the pension benefit obligation. The impact of the reduction in discount rates was partially offset by other actuarial gains such as higher than expected asset returns over the year, a reduction in the future benefit inflation assumptions, a change to the commutation assumption (ROI Staff) and other experience gains over the year.

Financial Risk Management

The main financial market risks facing the Group continue to include foreign currency exchange rate risk, commodity price fluctuations, interest rate risk and creditworthiness risk in relation to its counterparties. 

The Board of Directors set the treasury policies and objectives of the Group, the implementation of which are monitored by the Audit Committee. There has been no significant change during the financial year to the Board’s approach to the management of these risks. Details of both the policies and control procedures adopted to manage these financial risks are set out in detail in note 23 to the Consolidated Financial Statements.

Currency risk management

The reporting currency and the currency used for all planning and budgetary purposes is Euro. However, as the Group transacts in foreign currencies and consolidates the results of non-Euro reporting foreign operations, it is exposed to both transaction and translation currency risk. 

Currency transaction exposures primarily arise on the Sterling, US, Canadian and Australian Dollar denominated sales of our Euro subsidiaries and Euro purchases in the Group’s Matthew Clark and Bibendum business. We seek to minimise this exposure, when economically viable to do so, by maximising the value of subsidiary foreign currency input costs to offset our sales exposure and by maximising the value of subsidiary foreign currency revenue to offset our payables exposure, creating a natural hedge. When the remaining net exposure is material, we manage it by hedging an appropriate portion for a period of up to two years ahead. Forward foreign currency contracts are used to manage this risk in a non-speculative manner when the Group’s net exposure exceeds certain limits as set out in the Group’s treasury policy. In the current financial year, the Group hedged a portion of its Euro payables exposure in Matthew Clark and Bibendum. At 29 February 2020 the Group has hedges to the value of €24.6 million in place at an average exchange rate of 1.15 GBP/EUR (28 February 2019: €48.7 million hedges at an average exchange rate of 1.115 GBP/EUR). The hedges are based on forecasted exposures and meet the requirements of IFRS 9 Financial Instruments. These hedges remain effective despite the impact of COVID-19.The fair value of outstanding hedges, as calculated by reference to the current market value resulted in a net liability at 29 February 2020 of €0.3 million (28 February 2019 : €2.0 million).

The average rate for the translation of results from Sterling currency operations was €1:£0.8721 (year ended 28 February 2019: €1:£0.8841) and from US Dollar operations was €1:$1.1132 (year ended 28 February 2019: €1:$1.1664). 

Comparisons for revenue, net revenue and operating profit before exceptional items for each of the Group’s reporting segments are shown at constant exchange rates for transactions by subsidiary undertakings in currencies other than their functional currency and for translation in relation to the Group’s Sterling and US Dollar denominated subsidiaries by restating the prior year at current year average rates.

Applying the realised FY2020 foreign currency rates to the reported FY2019 revenue, net revenue and operating profit^(i)(iv) as shown below.

Table 3 – Constant currency comparatives

	Year ended 28 February 2019	FX transaction	FX translation	Year ended 28 February 2019
	€m	€m	€m	€m
Revenue
Matthew Clark and Bibendum	1,156.6	-	15.9	1,172.5
Ireland	318.3	-	0.9	319.2
Great Britain	482.7	-	6.6	489.3
International	39.7	-	1.1	40.8
Total	1,997.3	-	24.5	2,021.8
Net revenue
Matthew Clark and Bibendum	1,010.5	-	13.9	1,024.4
Ireland	219.2	-	0.6	219.8
Great Britain	306.3	-	4.2	310.5
International	38.9	-	1.0	39.9
Total	1,574.9	-	19.7	1,594.6
Operating profit(i)
Matthew Clark and Bibendum	15.7	-	0.2	15.9
Ireland	40.3	(0.1)	0.1	40.3
Great Britain	42.1	-	0.6	42.7
International	6.4	-	0.1	6.5
Total	104.5	(0.1)	1.0	105.4

Commodity Price and Other Risk Management

The Group is exposed to commodity price fluctuations, and manages this risk, where economically viable, by entering into fixed price supply contracts with suppliers. We do not directly enter into commodity hedge contracts. The cost of production is also sensitive to variability in the price of energy, primarily gas and electricity. Our policy is to fix the cost of a certain level of energy requirement through fixed price contractual arrangements directly with its energy suppliers.

The Group seeks to mitigate risks in relation to the continuity of supply of key raw materials and ingredients by developing trade relationships with key suppliers. We have long-term apple supply contracts with farmers in the west of England and have an agreement with malt farmers in Scotland for the supply of barley.

In addition, the Group enters into insurance arrangements to cover certain insurable risks where external insurance is considered by management to be an economic means of mitigating these risks.

Jonathan Solesbury

Group Chief Financial Officer

Notes to the Group Chief Financial Officer’s Review

(i) Before exceptional items.

(ii) Adjusted basic/diluted earnings per share (‘EPS’) excludes exceptional items. Please also see note 9 of the financial statements.

(iii) Free Cash Flow (‘FCF’) that comprises cash flow from operating activities net of tangible and intangible cash outflows which form part of investing activities. FCF highlights the underlying cash generating performance of the ongoing business. FCF benefits from the Group’s purchase receivables programme which contributed €131.4m (2019:€152.6m) inflow in the period. A reconciliation of FCF to net movement in cash per the Group’s Cash Flow Statement is set out above.

(iv) FY2019 comparative adjusted for constant currency (FY2019 translated at FY2020 F/X rates). FY2020 excluding the impact of IFRS 16 Leases so as to be a direct comparison to FY2019 on a constant currency basis.

(v) Effective tax rate is calculated on the Group’s Profit before tax, excluding exceptional items and excluding the share of equity accounted investments’ profit after tax.

(vi) Net debt comprises borrowings (net of issue costs) less cash. Net debt including finance leases comprises borrowings (net of issue costs) less cash plus leases capitalised under IFRS 16 Leases.

(vii) Adjusted EBITDA is earnings before exceptional items, finance income, finance expense, tax, depreciation, amortisation charges and equity accounted investments’ profit after tax. A reconciliation of the Group’s operating profit to EBITDA is set out on page 33.