Directors’ Report
The Directors present the Annual Report and audited Consolidated Financial Statements of the Group for the year ended 29 February 2020.
Principal Activities
The Group’s principal trading activity is the production, marketing and distribution of cider and beer, wine, soft drinks and bottled water.
Non-Financial Reporting Statement
In compliance with the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017, the table below is designed to help stakeholders navigate to the relevant sections in this Annual Report to understand the Group’s approach to these non-financial matters:
Reporting Requirements | Our Policies | Section in Annual Report or Page References | Risks |
|---|---|---|---|
Environmental matters | Environmental Sustainability | Although the risks associated with environmental matters are actively monitored, the Group does not believe these risks meet the threshold of a principal risk for our business. | |
Social and Employee matters | - Diversity, Equality and Inclusion - Health and Safety - Whistleblowing - Conflicts of Interest | For employee matters, retention and recruitment of staff is one of our principal risks. Please refer to page 16 for more details. | |
Human Rights | Anti-Modern Slavery | Although the risks associated with human rights abuses are actively monitored, the Group does not believe these risks meet the threshold of a principal risk for our business. | |
Anti-bribery and Corruption | Code of Conduct Compliance Anti-Bribery | Although the risks associated with bribery and corruption are actively monitored, the Group does not believe these risks meet the threshold of a principal risk for our business. | |
Description of the business model | |||
Non-Financial key performance indicators |
Dividends
An interim dividend of 5.50 cent per share for the year ended 29 February 2020 was paid on 13 December 2019. Due to the emergence of COVID-19 and the impact this has on global economies and on business generally, the Board has concluded it is not appropriate to pay a final dividend for FY2020. For the previous financial year ending 28 February 2019, an interim dividend of 5.33 cent per share was paid on 13 December 2019 and a final dividend of 9.98 cent per share was paid on 19 July 2019.
Board of Directors
The names, functions and date of appointment of the current Directors are as follows:
Director | Function | Appointment |
|---|---|---|
Stewart Gilliland | Interim Executive Chairman | 2020 |
Jonathan Solesbury | Group Chief Financial Officer | 2017 |
Andrea Pozzi | Chief Operating Officer | 2017 |
Jill Caseberry | Independent Non-executive Director | 2019 |
Jim Clerkin | Independent Non-executive Director | 2017 |
Vincent Crowley | Independent Non-executive Director | 2016 |
Emer Finnan | Independent Non-executive Director | 2014 |
Helen Pitcher | Independent Non-executive Director | 2019 |
Jim Thompson | Independent Non-executive Director | 2019 |
Research and Development
Certain Group undertakings are engaged in ongoing research and development aimed at improving processes and expanding product ranges.
Listing Arrangements
During the course of the year, the Group sought inclusion in the FTSE UK Index Series. In order to facilitate the entry into the FTSE UK Index Series, the Group cancelled the listing and trading of C&C shares on Euronext Dublin with effect from 8 October 2019.
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.
The Group remains domiciled and tax resident in Ireland, with its registered and corporate head office located in Dublin. The Group also retains a significant manufacturing, commercial and brand presence in Ireland.
Share Price
The price of the Company’s ordinary shares as quoted on the London Stock Exchange at the close of business on 28 February 2020 (being the last working day) was £3.28 (28 February 2019: £2.63 (converted from Euro equivalent)). The price of the Company’s ordinary shares ranged between £3.28 and £4.11 during the year.
Further Information on the Group
The information required by section 327 of the Companies Act 2014 to be included in this report with respect to:
1. The review of the development and performance of the business and future developments is set out in the interim Executive Chairman’s Review on pages 22 to 30 and the Strategic Report on pages 2 to 49.
2. The principal risks and uncertainties which the Company and the Group faces are set out in the Strategic Report on pages 13 to 21 and which have been updated to reflect the risks posed by COVID-19.
3. The key performance indicators relevant to the business of the Group, including environmental and employee matters, are set out in the Strategic Report on page 12 and in the Group Chief Financial Officer’s Review on pages 31 to 36; and further information in respect of environmental and employee matters is set out in the Responsibility Report on pages 37 to 49.
4. The financial risk management objectives and policies of the Company and the Group, including the exposure of the Company and the Group to financial risk, are set out in the Group Chief Financial Officer’s Review on pages 31 to 36 and note 23 to the financial statements.
The Group’s Viability Statement is contained in the Strategic Report on pages 20 to 21.
Corporate Governance
In accordance with Section 1373 of the Companies Act 2014, the corporate governance statement of the Company for the year, including the main features of the internal control and risk management systems of the Group, is contained in the Strategic Report and the Corporate Governance Report on pages 58 to 66.
Substantial Interests
As at 29 February 2020 and 3 June 2020, details of interests over 3% in the ordinary share capital carrying voting rights which have been notified to the Company are:
No. of ordinary shares held as notified at | % at | No. of ordinary shares held as notified at | % at 3 June 2020 | |
|---|---|---|---|---|
Artemis Investment Management LLP | 34,074,190 | 11.01% | 37,255,442 | 11.99% |
FIL Limited | 30,728,611 | 9.90% | 14,265,107 | 5.93% |
FMR LLC | 29,624,562 | 9.54% | 29,624,562 | 9.54% |
Southestern Asset Management, Inc. | 17,703,604 | 5.69% | 17,703,604 | 5.70% |
Silchester International Investors LLP | 15,465,170 | 4.99% | 15,465,170 | 4.98% |
Investec Asset Management Limited | 15,391,039 | 4.98% | 15,391,039 | 4.96% |
BlackRock, Inc. | 12,504,053 | 4.03% | 12,222,351 | 3.94% |
Wellington Management Company, LLP | 12,306,055 | 3.97% | 12,306,055 | 3.96% |
JNE Partners LLP | 7,944,591 | 2.54% | 7,944,591 | 4.07% |
As far as the Company is aware, other than as stated in the table above, no other person or company had at 29 February 2020 or 3 June 2020 an interest in 3% or more of the Company’s share capital carrying voting rights.
Issue of Shares and Purchase of Own Shares
At the Annual General Meeting held on 4 July 2019, the Directors received a general authority to allot shares. A limited authority was also granted to Directors to allot shares for cash otherwise than in accordance with statutory pre-emption rights. Resolutions will be proposed at the Annual General Meeting to be held on 23 July 2020 to allot shares to a nominal amount which is equal to approximately one-third of the issued ordinary share capital of the Company. In addition, resolutions will also be proposed to allow the Directors to allot shares for cash otherwise than in accordance with statutory pre-emption rights up to an aggregate nominal value which is equal to approximately 5% of the nominal value of the issued share capital of the Company and, in the event of a rights issue, and a further 5% of the nominal value of the issued share capital of the Company for the purposes of an acquisition or a specified capital investment. If granted, these authorities will expire at the conclusion of the Annual General Meeting in 2021 and the date 18 months after the passing of the resolution, whichever is earlier.
The Directors have currently no intention to issue shares pursuant to these authorities except for issues of ordinary shares under the Company’s share option plans and the Company’s scrip dividend scheme. At the Annual General Meeting held on 4 July 2019 authority was granted to purchase up to 10% of the Company’s ordinary shares (the “Repurchase Authority”). As at the date of this Report, the Group has purchased 1.76% of the Company’s ordinary shares pursuant to the Repurchase Authority from the start of the financial year.
The Group spent €23m in the year under review, using an average exchange rate to convert GBP spend into Euros (2019: €1.9m) (including commission and related costs) to purchase 5,625,000 (2019: 576,716) of the Company’s ordinary shares.
Special resolutions will be proposed at the Annual General Meeting to be held on 23 July 2020 to renew the authority of the Company, or any of its subsidiaries, to purchase up to 10% of the Company’s ordinary shares in issue at the date of the Annual General Meeting and in relation to the maximum and minimum prices at which treasury shares (effectively shares purchased and not cancelled) may be re-issued off-market by the Company. If granted, the authorities will expire on the earlier of the date of the Annual General Meeting in 2021 and the date 18 months after the passing of the resolution. The minimum price which may be paid for shares purchased by the Company shall not be less than the nominal value of the shares and the maximum price will be 105% of the average market price of such shares over the preceding five days. The Directors will only exercise the power to purchase shares if they consider it to be in the best interests of the Company and its shareholders.
As at the date of this report, options to subscribe for a total of 3,765,506 ordinary shares (excluding Recruitment and Retention Awards) are outstanding, representing 1.21% of the Company’s total voting rights. If the authority to purchase ordinary shares were used in full, the options would represent 1.35% of the Company’s total voting rights.
Dilution Limits and Time Limits
All employee share plans contain the share dilution limits recommended in institutional guidance, namely that no awards shall be granted which would cause the number of Shares issued or issuable pursuant to awards granted in the ten years ending with the date of grant (a) under any discretionary or executive share scheme adopted by the Company to exceed 5%, and (b) under any employees’ share scheme adopted by the Company to exceed 10%, of the ordinary share capital of the Company in issue at that time.
The European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006
Structure of the Company’s share capital
At 3 June 2020 the Company has an issued share capital of 319,495,110 ordinary shares of €0.01 each and an authorised share capital of 800,000,000 ordinary shares of €0.01 each.
At 29 February 2020, the trustee of the C&C Employee Trust held 1,784,957 ordinary shares of €0.01 each in the capital of the Company. Shares held by the trustee of the C&C Employee Trust are accounted for as if they were treasury shares. These shares are, however, included in the calculation of Total Voting Rights for the purposes of Regulation 20 of the Transparency (Directive 2004/109/EC) Regulations 2007 (“TVR Calculation”).
As at 29 February 2020, a subsidiary of the Group held 9,025,000 shares in the Company, which were acquired under the authority granted to the Company. These shares are not included in the TVR Calculation and are accounted for as treasury shares.
Details of employee share schemes, and the rights attaching to shares held in these schemes, can be found in note 4 (Share-Based Payments) to the financial statements and the Report of the Remuneration Committee on Directors’ Remuneration on pages 77 to 92.
The Company has no securities in issue conferring special rights with regard to control of the Company.
Details of persons with a significant holding of securities in the Company are set out on page 52.
Rights and obligations attaching to the Ordinary Shares
All ordinary shares rank pari passu, and the rights attaching to the ordinary shares (including as to voting and transfer) are as set out in the Company’s Articles of Association (“Articles”). A copy of the Articles may be obtained upon request to the Company Secretary.
Holders of ordinary shares are entitled to receive duly declared dividends in cash or, when offered, additional Ordinary Shares. In the event of any surplus arising on the occasion of the liquidation of the Company, shareholders would be entitled to a share in that surplus pro rata to their holdings of ordinary shares.
Holders of ordinary shares are entitled to receive notice of and to attend, speak and vote in person or by proxy, at general meetings having, on a show of hands, one vote, and, on a poll, one vote for each Ordinary Share held. Procedures and deadlines for entitlement to exercise, and exercise of, voting rights are specified in the notice convening the general meeting in question. There are no restrictions on voting rights except in the circumstances where a “Specified Event” (as defined in the Articles) shall have occurred and the Directors have served a restriction notice on the shareholder. Upon the service of such restriction notice, no holder of the shares specified in the notice shall, for so long as such notice shall remain in force, be entitled to attend or vote at any general meeting, either personally or by proxy.
Holding and transfer of Ordinary Shares
The ordinary shares may be held in either certificated or uncertificated form (through CREST). Save as set out below, there is no requirement to obtain the approval of the Company, or of other shareholders, for a transfer of ordinary shares. The Directors may decline to register (a) any transfer of a partly-paid share to a person of whom they do not approve, (b) any transfer of a share to more than four joint holders, and (c) any transfer of a certificated share unless accompanied by the share certificate and such other evidence of title as may reasonably be required. The registration of transfers of shares may be suspended at such times and for such periods (not exceeding 30 days in each year) as the Directors may determine.
Transfer instruments for certificated shares are executed by or on behalf of the transferor and, in cases where the share is not fully paid, by or on behalf of the transferee. Transfers of uncertificated shares may be effected by means of a relevant system in the manner provided for in the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996 (the “CREST Regulations”) and the rules of the relevant system. The Directors may refuse to register a transfer of uncertificated shares only in such circumstances as may be permitted or required by the CREST Regulations.
The Board proposes to convene later in the year a separate Extraordinary General Meeting to consider a number of resolutions to be proposed in connection with the migration of securities settlement in the securities of Irish registered companies listed on the London Stock Exchange (such as the Company) and/or Euronext Dublin from the current settlement system, CREST, to the replacement system, Euroclear Bank (“Migration”). This Migration is required as a result of Brexit. We will provide you with further details of the proposed Migration later in the year.
Rules concerning the appointment and replacement of the Directors and amendment of the Company’s Articles
Unless otherwise determined by ordinary resolution of the Company, the number of Directors shall not be less than two or more than 14. Subject to that limit, the shareholders in general meeting may appoint any person to be a Director either to fill a vacancy or as an additional Director. The Directors also have the power to co-opt additional persons as Directors, but any Director so co-opted is under the Articles required to be submitted to shareholders for re-election at the first Annual General Meeting following his or her co-option.
The Articles require that at each Annual General Meeting of the Company one-third of the Directors retire by rotation. However, in accordance with the recommendations of the UK Corporate Governance Code, the Directors have resolved they will all retire and submit themselves for re-election by the shareholders at the Annual General Meeting to be held this year.
The Company’s Articles may be amended by special resolution (75% majority of votes cast) passed at general meeting.
Powers of Directors
Under its Articles, the business of the Company shall be managed by the Directors, who exercise all powers of the Company as are not, by the Companies Acts or the Articles, required to be exercised by the Company in general meeting.
The powers of Directors in relation to issuing or buying back by the Company of its shares are set out above under “Issue of Shares and Purchase of Own Shares”.
Change of control and related matters
Certain of the Group’s borrowing facilities include provisions that, in the event of a change of control of the Company, could oblige the Group to repay the facilities. Certain of the Company’s customer and supplier contracts and joint venture arrangements also contain provisions that would allow the counterparty to terminate the agreement in the event of a change of control of the Company. The Company’s Executive Share Option Scheme and Long-Term Incentive Plan each contain change of control provisions which allow for the acceleration of the exercise of share options/awards in the event of a change of control of the Company.
There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid in excess of their normal contractual entitlement.
Shareholder Rights Directive II
Following the end of the financial year, on 20 March 2020, the provisions of the Shareholders’ Rights Directive II (SRD II) became law in Ireland with the publication of the European Union (Shareholders’ Rights) Regulations 2020 (SRD II Regulations). The SRD II Regulations apply with effect from 30 March 2020.
SRD II Regulations codify that Irish companies must seek shareholder approval of a remuneration report annually; and, an advisory remuneration policy once every four years. The Group is, in effect, already in compliance with this requirement having provided shareholders with the opportunity to opine on the Group’s remuneration report annually since 2010; and also provided shareholders with an advisory vote on the Group’s Remuneration Policy.
Political Donations
No political donations were made by the Group during the year that require disclosure in accordance with the Electoral Acts, 1997 to 2002.
Accounting Records
The measures taken by the Directors to secure compliance with the requirements of Sections 281 to 285 of the Companies Act, 2014 with regard to the keeping of adequate accounting records are to employ accounting personnel with appropriate qualifications, experience and expertise and to provide adequate resources to the finance function. The books of account of the Company are maintained at the Group’s office in Bulmers House, Keeper Road, Crumlin, Dublin 12, D12 K702.
Auditor
In accordance with Section 383(2) of the Companies Act, 2014, the auditors, Ernst & Young, Chartered Accountants, will continue in office. Ernst & Young were first appointed as the Company’s auditor during the financial year ending 28 February 2018.
Disclosure of Information to the Auditor
In accordance with Section 330 of the Companies Act, 2014, the Directors confirm that, so far as they are each aware, there is no relevant audit information, being information needed by the auditor in connection with preparing their report, of which the Company’s auditor is unaware. Having made enquiries with fellow Directors and the Company’s auditor, each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
Directors Compliance Statement (Made In Accordance With Section 225 of the Companies Act, 2014)
The Directors acknowledge that they are responsible for securing compliance by the Company with its relevant obligations as are defined in the Companies Act, 2014 (the ‘Relevant Obligations’).
The Directors confirm that they have drawn up and adopted a compliance policy statement setting out the Company’s policies that, in the Directors’ opinion, are appropriate to the Company with respect to compliance by the Company with its relevant obligations.
The Directors further confirm the Company has put in place appropriate arrangements or structures that are, in the Directors’ opinion, designed to secure material compliance with its relevant obligations including reliance on the advice of persons employed by the Company and external legal and tax advisers as considered appropriate from time to time and that they have reviewed the effectiveness of these arrangements or structures during the financial year to which this report relates.
Financial Instruments
In the normal course of business, the Group has exposure to a variety of financial risks, including foreign currency risk, interest rate risk, liquidity risk, and credit risk. The Company’s financial risk objectives and policies are set out in Note 23 of the financial statements.
Post Balance Sheet Events
As outlined in the Group’s viability statement on pages 20 to 21, COVID-19 is having a material impact on the Group’s business post year end. In response to this, the Group has implemented a series of measures to reduce operating costs, maximise available cash flow, and maintain and strengthen the Group’s liquidity position.
In March 2020, the Group completed the successful issue of approximately €140 million of new US Private Placement (‘USPP’) notes.
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 scheme. The Group had not drawn down on this facility as at 3 June 2020.
Due to the emergence of COVID-19 and the impact this has on global economies and on business generally, the Board concluded, post year-end, that it was not appropriate to pay a final dividend for FY2020.
See note 29 (Post Balance Sheet Events) to the financial statements for further information.
Annual General Meeting
Your attention is drawn to the letter to shareholders and the notice of meeting accompanying this report which set out details of the matters which will be considered at the Annual General Meeting. In particular, please ensure to read additional disclosures relating to restrictions at the Annual General Meeting due to government and health authority guidance on COVID-19 social distancing.
Other Information
Other information relevant to the Director’s Report may be found in the following sections of the Annual Report:
Information | Location in the Annual Report |
|---|---|
Results | Financial Statements – pages 104 to 110. |
Principal risks & uncertainties including risks associated with recent emergence of COVID-19 | Principal Risks & Uncertainties – pages 13 to 21. |
Directors’ remuneration, including the interests of the directors and secretary in the share capital of the Company | Directors’ Remuneration Report – pages 77 to 92. |
Long-Term Incentive Plan, share options and equity settled incentive schemes | Directors’ Remuneration Report – pages 77 to 92. |
Significant subsidiary undertakings | Financial Statements – Note 28. |
The Directors’ Report for the year ended 29 February 2020 comprises these pages and the sections of the Annual Report referred to under ‘Other information’ above, which are incorporated into the Directors’ Report by reference.
Signed
On behalf of the Board
Stewart Gilliland | Jonathan Solesbury |
Interim Executive Chairman | Group Chief Financial Officer |
3 June 2020