GROUP STRATEGy
OUR LONG TERm STRATEGy iS TO bUiLd A
SUSTAiNAbLE iNTERNATiONAL CidER-LEd, mULTi-
bEvERAGE bUSiNESS ThROUGh A COmbiNATiON Of
ORGANiC GROwTh ANd SELECTivE ACqUiSiTiONS.
ThE mEdiUm-TERm STRATEGiC GOALS fOR ThE
GROUP ARE:
• TO mAiNTAiN STRONG bRANd mARkET
COmbiNATiONS iN CORE mARkETS by iNvESTiNG iN,
ANd iNNOvATiNG wiTh, OUR PREmiUm bRANdS
• TO TRANSfORm OUR iNTERNATiONAL bUSiNESS
ThROUGh iNvESTmENT iN bRANdS ANd
iNfRASTRUCTURE ANd ThROUGh ThE dEvELOPmENT
Of STRATEGiC ALLiANCES
ThUS ENhANCiNG fUTURE EARNiNGS GROwTh.
CONTENTS
1
OPERATING AND STRATEGIC HIGHLIGHTS
2
MARKET OPERATION
4
CHAIRMAN’S STATEMENT
6
Group CHIEF EXECuTIVE oFFICEr’S rEVIEW
10
OPERATIONS REVIEW
18
CHIEF FInanCIal oFFICEr’S rEVIEW
24
CORPORATE RESPONSIBILITY
30
BOARD OF DIRECTORS
32
DIRECTORS’ REPORT
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE
37
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION 47
56
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
57
INDEPENDENT AUDITOR’S REPORT
59
GROUP INCOME STATEMENT
60
GROUP STATEMENT OF COMPREHENSIVE INCOME
61
GROUP BALANCE SHEET
62
GROUP CASH FLOW STATEMENT
63
GROUP STATEMENT OF CHANGES IN EQUITY
64
COMPANY BALANCE SHEET
65
COMPANY CASH FLOW STATEMENT
66
COMPANY STATEMENT OF CHANGES IN EQUITY
67
STATEMENT OF ACCOUNTING POLICIES
78
noTES ForMInG parT oF THE FInanCIal STaTEMEnTS
120
DEFInITIonS
121
SHarEHolDEr anD oTHEr InForMaTIon
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
OPERATiNG ANd STRATEGiC hiGhLiGhTS
REVENUE
€480.8m
down 4.8% (1)
(reported basis: down 5.7%)
OPERATING PROFIT
€111.2m
up 9% (1)
(reported basis: up 10.2%)
OPERATING MARGIN
FREE CASH FLOW
23.1%
up 2.9 percentage points (1)
(reported basis: up 3.3 ppts)
€102.6m
78.1% of EBITDA
ADJUSTED BASIC
EARNINGS PER SHARE
continuing operations
ADJUSTED DILUTED
EARNINGS PER SHARE
continuing operations
28.3 cent
up 13.2%
27.6 cent
up 13.6%
ADJUSTED DILUTED EARNINGS PER SHARE
35c
30c
25c
20c
FY2008
FY2009
FY2010
FY2011
FY2012
• in a challenging economic environment,
the Group’s results demonstrate the
resilience of its business model focusing
on brand-market combinations.
• Stable earnings were achieved in the
Republic of ireland for the third year
running with an increased contribution
from beer.
• The magners brand in Great britain
delivered positive volume and revenue
growth for the first time in five years.
• Operating profits of Tennent’s business
grew 22.5%, providing an earnings base
positioned for growth.
• Supply side operating efficiencies were
enhanced by good contract packaging wins.
• Our export cider and beer volumes grew
by 31.9% during the year, with margin
improvement.
• for the third financial year the Group
has delivered consistent earnings
growth in line with stated guidance.
• focused investments were made in
growing international cider markets
with the purchase of hornsby’s in the
US and a build out of international sales
infrastructure.
• Product innovation continues with
the launch of the magners Specials,
Caledonia best and Tennent’s Original
Export.
• Our high conversion of earnings to
free cash flow resulted in a healthy
balance sheet supported by a new
€250m financing facility available for the
Group’s future development.
(1) on a constant currency basis, see page 23
1
mARkET OPERATiON
USA
CANAdA
AUSTRALiA
MaGnErS
MaGnErS
MaGnErS
REST Of
wORLd
MaGnErS
TEnnEnT’S
TEnnEnT’S
TEnnEnT’S
TEnnEnT’S
GaYMEr CIDEr Co
GaYMEr CIDEr Co
GaYMEr CIDEr Co
HornSBY’S
USA
Canada
Caribbean
Australia
bahrain
China
hong kong
israel
Japan
malaysia
New Zealand
qatar
Singapore
Thailand
UAE
loCaTIonS
Austria
belgium
bulgaria
Cyprus
Czech Republic
denmark
finland
france
Germany
Greece
hungary
italy
Latvia
Luxembourg
malta
Portugal
Russia
Spain
Sweden
Switzerland
The Netherlands
Turkey
Ukraine
2
2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
C&C bRANdS
CIDEr BranDS
bulmers is a premium, traditional blend of irish cider with an
authentic clean and refreshing taste.
magners is a premium, traditional blend of irish cider with a
crisp, refreshing flavour and a natural authentic character.
The Gaymers cider range has just been relaunched to include
apple, pear and two fruit flavoured ciders.
blackthorn Cider is a west Country legend and is one of britain’s
best known ciders.
Olde English is a traditional medium dry cider and is enjoyed for
its distinctive taste.
Addlestones is a premium cloudy cider, smooth and easy drinking
thanks to its unique double fermentation process.
hornsby’s is an American cider which combines traditional cider-
making techniques with American attitude. it comes in two styles,
Crisp Apple and Amber draft.
Other cider brands include bulmers berry, bulmers Pear,
magners Pear, magners Specials, Special vat, k, Natch and
diamond white.
BEEr BranDS
Tennent’s Lager is brewed to the highest standards to create a
lager with a crisp taste and refreshingly clean finish. Tennent’s
has been made with pride in the heart of Glasgow since 1885, but
is famous far beyond its home city. Tennent’s Lager is Scotland’s
best-selling lager.
Tennent’s Original Export is brewed in Glasgow using finest
natural ingredients, including 100% Scottish barley. it is a
golden lager with a well rounded flavour and a distinct smooth
maltiness.
Caledonia best is a refreshingly modern, distinctive new pint
that is perfectly balanced, sweet and smooth, with a malty, roast
flavour and a pleasant hoppy bitterness.
Other beer brands include Tennent’s Extra, Tennent’s Scotch Ale,
Tennent’s 1885 and Caledonia Smooth.
OPTION C v2
REPUbLiC
Of iRELANd
OPTION C v2
NORThERN
iRELANd
SCOTLANd
loCaTIonS
BulMErS
MaGnErS
MaGnErS
ENGLANd
& wALES
MaGnErS
TEnnEnT’S
TEnnEnT’S
TEnnEnT’S
TEnnEnT’S
CalEDonIa
SMooTH
CalEDonIa
SMooTH
CalEDonIa
BEST
GaYMEr
CIDEr Co
CALEDONIA
SMOOTH
CALEDONIA
SMOOTH
aBI DISTrIBuTIon
rIGHTS
On-trade and non-
transnational off-trade
GaYMEr CIDEr Co
GaYMEr CIDEr Co
Spirit Font Domed Lens
12 June 2008
Spirit Font Domed Lens
12 June 2008
HIGHS & LOWS
SHADOWS
CALEDONIA SMOOTH - HD DIGITAL
BACKGROUND
- HD DIGITAL
- HD DIGITAL
- PHOTOSHOP GRADIENT
CLIENT
CONTACT
JOB NUMBER
PROJECT
DESIGN
DESIGNER / ARTWORKER
PRODUCTION CONTACT
AW APPLICATION
COLOUR PROFILE
DATE
Tennet’s Crown
Wendy Espie
TCB032/05C
Caledonia Best
Dome Lens - OPTION C
LS/GH
Judith Allan
Illustrator CS4
X_act ISO Coated v2.icc
07/02/12
PRINT COLOURS
SCALE MM: THIS RULER MEASURES 100MM WHEN ARTWORK IS 100%
CYAN
0
10
MAGENTA
20
APPROVAL
YELLOW
30
40
BLACK
50
WHITE PLATE
Design
60
PRINT COLOURS
70
Date
80
90
100
A/C management
0
30
20
10
CYAN
DATE
BLACK
YELLOW
MAGENTA
ARTWORK
VERSION No.
4
PRINT COLOURS
SPECIAL INSTRUCTIONS
DEVELOPMENT WORK ONLY NOT FINAL ARTWORK
SCALE MM: THIS RULER MEASURES 100MM WHEN ARTWORK IS 100%
PRINT COLOURS
N.B. The colours on this artwork run out are for colour indication only.
PLEASE READ
Refer to listed Pantone (PMS) specification or attached swatches
where applicable for true colour representation.
PLEASE NOTE IF VIEWING THIS ARTWORK AS A PDF IT MAY NOT
All artwork is approved by jkr as of the date given.
BE TO SCALE. THE SCALE OPPOSITE WILL GIVE AN INDICATION
Please double check ALL details with client prior to final production.
ANY changes made after this date are the responsibility of the client.
OF THE REDUCTION
Date
APPROVAL
WHITE PLATE
Design
Date
40
50
60
Production
CLIENT
CONTACT
JOB NUMBER
PROJECT
DESIGN
DESIGNER / ARTWORKER
PRODUCTION CONTACT
AW APPLICATION
COLOUR PROFILE
Tennet’s Crown
Wendy Espie
TCB032/05C
Caledonia Best
Dome Lens - OPTION C
LS/GH
Judith Allan
Illustrator CS4
X_act ISO Coated v2.icc
07/02/12
ARTWORK
VERSION No.
4
70
80
90
100
A/C management
N.B. The colours on this artwork run out are for colour indication only.
PLEASE READ
Refer to listed Pantone (PMS) specification or attached swatches
where applicable for true colour representation.
PLEASE NOTE IF VIEWING THIS ARTWORK AS A PDF IT MAY NOT
All artwork is approved by jkr as of the date given.
BE TO SCALE. THE SCALE OPPOSITE WILL GIVE AN INDICATION
Please double check ALL details with client prior to final production.
ANY changes made after this date are the responsibility of the client.
OF THE REDUCTION
Date
Production
HIGHS & LOWS
SHADOWS
CALEDONIA SMOOTH - HD DIGITAL
BACKGROUND
- HD DIGITAL
- HD DIGITAL
- PHOTOSHOP GRADIENT
aBI DISTrIBuTIon
rIGHTS
DEVELOPMENT WORK ONLY NOT FINAL ARTWORK
Non-transnational on and
off-trade
SPECIAL INSTRUCTIONS
aBI DISTrIBuTIon
rIGHTS
Non-exclusive on-trade
Date
Date
33
ChAiRmAN’S STATEmENT
i am pleased to report continuing progress against the targets set out in
our three year strategic plan established in december 2010. increased
operating profits are part of that success but importantly we are also building
our business for the longer term both domestically and internationally. The
initiatives taken have strengthened our brands and expanded our horizons.
whilst driving the business forward and facing tough macro-economic
conditions, this is the third financial year that the Group has delivered
consistent earnings growth in line with our investors’ expectations.
There have been well recognised difficult economic conditions in our core markets of
the Republic of ireland and the U.k. despite these challenges, the team have delivered a
very creditable performance. This is due to strong brand performance from brands which
have both a local heritage and international potential and careful management of our
production and distribution resources. developing co-operative relationships has also
contributed to our success both internationally and in our local markets.
we are anticipating a continuing period of political and financial uncertainty within
Europe. This will inevitably have economic and commercial consequences but we are
confident that our financial and brand strength coupled with our increasing international
exposure provides us with a solid foundation for progress.
building
on solid
foundations
4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Consolidating and developing our core
domestic brands has been and will
remain a key objective but it has always
been recognised that our brands and
expertise have international potential. we
are building momentum across several
markets. New commercial relationships
have been forged in Canada and Australia.
Our financial strength also allows us to
take advantage of opportunities as they
arise. The acquisition of hornsby’s in the
US was one opportunity we were delighted
to grasp. The global potential of cider
and our business is increasingly being
recognised.
pEoplE
it has been a year of change. At the end of
december, John dunsmore stepped down
from his role as Group Chief Executive
Officer. i would like to thank John for the
contribution he has made to the Group.
Under his leadership since 2008, the
executive team has delivered a substantial
turnaround of the Group transforming
it and creating a stable earnings record
during a period of worldwide economic
turbulence.
The board decided that Stephen Glancey,
the Group Chief Operating Officer and
the Group’s designated successor, was
the right person to succeed John as
Group Chief Executive Officer to lead the
next phase of our development. Stephen
has played a vital role within the Group
over the past three years, including the
successful acquisition and integration of
the Tennent’s and Gaymers businesses.
he has laid the foundation for the
international development of the Group’s
cider brands. The board also decided that
kenny Neison, the Group’s former Strategy
director, should become Group Chief
financial Officer. with their considerable
knowledge of the business, such moves
emphasise that the changing of the guard
represented an evolution. it has been a
smooth transition and one that ensured
continuity in the Group’s momentum,
strategy and direction.
The year also saw the departure of Liam
fitzGerald, a non-executive director since
the Group’s flotation in 2004. The Group
thanks him for his meaningful contribution
on all fronts, especially the commercial
perspective he brought to the business.
Two new non-executive directors have
recently joined the board: Tony Smurfit
and Stewart Gilliland. Tony has strong
experience in global markets, managing
international operations serving a world-
wide customer base. Stewart brings his
experience of the food and beverages
sectors and, in particular, long alcohol
drinks in international markets. Their
international market expertise will be
valuable to the C&C board as we focus
on the growth and development of our
business worldwide. The breadth of
commercial and geographical experience
of the non-executive directors is an
appropriate governance counterpoint to
the executive team in the international
development of the business.
with the growing importance of the
international side of the business, the
Group has brought in Joris brams to
drive our international strategy. Joris
brings considerable expertise, with
sector and production experience from
around the world.
GoVErnanCE & rESponSIBIlITY
The board and senior management team
are committed to maintaining the highest
standards of governance and ethical
behaviour throughout the business.
A statement of our main Governance
principles and practice is provided on
pages 37 to 46.
we continue to work under the
requirements of the Uk Corporate
Governance Code and the irish Corporate
Governance Annex.
The board also works to ensure its own
effectiveness, by undertaking a regular
evaluation of the performance of the board
and its committees.
CorporaTE rESponSIBIlITY
we take corporate responsibility seriously
and our Corporate Responsibility
statement on pages 24 to 29 sets out
our work this year. being a part of our
community is a key to our commercial
success, as it gives us insight to meet our
customers’ needs in a responsive manner.
we encourage responsible drinking
and our views on minimum pricing are
documented in this report. we seek to
combine the interests of the industry with
those of society at large. we support our
customers in meeting the challenge of
duty and regulation. we communicate with
Government and regulators emphasising
our community of interest in a healthy
industry, in all senses.
DIVIDEnDS
Recognising the financial strength and
cash generation of the business, we intend
to pursue a progressive dividend policy. it
is proposed to pay a final dividend of 4.5
cent per share, subject to shareholder
approval. if approved, this will bring the
Group’s full year dividend to 8.17 cent per
share. A scrip dividend alternative will also
be available.
At the AGm we are also seeking the usual
authority for the Company to purchase
its own shares. Any authority given to the
Company to purchase its own shares will
only be exercised if the board considers
it would be in the best interests of the
shareholders generally.
BonuS & rEWarDS
Our management and staff have
performed well under difficult economic
conditions. we believe in rewards only
for performance and our track record
demonstrates this. i am therefore glad to
report that bonuses are being awarded
this year, based on the performance and
results achieved.
Our purpose is to optimise shareholder
value and we have therefore restructured
our employee incentives this year to
ensure that they are aligned with the
interests of our shareholders, particularly
through long term equity participation.
Some of our share incentive schemes
need to be modified to align more closely
with the interests of our shareholders
and our intention is therefore to propose
modifications at the AGm to further
achieve this objective. further details are
contained in the notice of AGm.
ConCluSIon
Twelve months ago we said: ‘we have to be
and are beginning to be on the front foot’.
This year we can state we have definitely
taken strides in the right direction and
have built momentum to drive our
evolution through the strength of our
business and brands.
in a difficult environment the Group’s
business has changed, results have
been delivered and our opportunities are
greater. This has been achieved through
our responsiveness and adaptability. The
Group has a fundamental belief in the
attractiveness of cider, a growing product
in markets around the world. we do not
expect, however, that macro-economic
conditions in the coming twelve months
will be benign, given the significant
political instabilities which will affect wider
economic prospects. we are, however, in
both a financial and commercial sense, in
a good position to meet these challenges
and for the Group to progress in both the
immediate and longer term.
Sir Brian Stewart
Chairman
5
GROUP ChiEf EXECUTivE OffiCER’S REviEw
This has been a robust year for the Group. in our domestic markets, our
brands and businesses performed well against a tough economic backdrop.
maintaining and developing our core domestic businesses has been a
key objective, alongside brand innovation and international development.
internationally, we are building momentum across several markets. we
continue to believe, and demonstrate, that the cider category is an exciting
place to be.
FoCuSInG on BranD-
MarkET CoMBInaTIon
Our business model seeks growth
through our brand-market combination,
combining brand investment with a
focus on local markets. in a challenging
economic environment in ROi and the
Uk, the Group’s results for the year
demonstrate the resilience of this
model. On a constant currency basis,
revenues of our continuing businesses
declined by 4.8% but Group operating
profit increased by 9.0% to €111.2m.
bulmers revenues and operating profit
in ROi remained under pressure but
an increased contribution from beer
offset the decline. The Tennent’s brand
performed well, and the overall operating
profit in Scotland increased. The magners
brand in Gb finished the year in positive
revenue growth for the first time in
five years. On the supply side we had
some good contract packaging wins.
Our export cider and beer volumes
grew by 31.9% during the year. we
invested in the global growth of cider
with the acquisition of the hornsby’s
brand in the US and through new
distribution agreements in key markets
for our core brand, magners.
Our high conversion of earnings to
free cash flow allowed us to end the
year with a healthy balance sheet
and a well-invested asset base.
This is the third financial year that
the Group has delivered earnings
in line with stated guidance. Our
products and our business model are
delivering long term reliable results.
we now seek to expand internationally
to maximise shareholder returns.
strong
brands,
local focus,
international development
6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
ThE CidER CATEGORy
CONTiNUES TO
GROw iN ThE
wORLd’S LARGEST
mARkET, AS wELL AS
EXhibiTiNG A TRENd
ThAT iNdiCATES
CONSUmERS ARE
TRAdiNG UP TO mORE
PREmiUm bRANdS.
STraTEGIC MoDEl anD kEY oBjECTIVES
Our strategic model is anchored on four fundamentals:
• BranD MarkET CoMBInaTIonS: using our brand presence in local markets
• MulTI-BEVEraGE plaTForMS: offering attractive brand
portfolios to customers
• auTHEnTIC loCal BranDS: backing brands that have a
strong local support
• a ConSErVaTIVE approaCH To THE BalanCE SHEET anD CaSH ManaGEMEnT:
maintaining our high free cash flow and applying it prudently
based on these fundamentals, our objectives for the year focused on four key areas:
• HolD MaGnErS SHarE In GB’S GroWInG CIDEr CaTEGorY, WHIlE IMproVInG
unIT prICInG
• HolD EarnInGS In roI
• MaInTaIn MEanInGFul GroWTH MoMEnTuM In InTErnaTIonal MarkETS
• DElIVEr on THE SYnErGIES oF TEnnEnT’S InTEGraTIon, anD purSuE BEnEFITS
oF prICInG anD MarGInS
1. HolD MaGnErS SHarE
In GrEaT BrITaIn
The cider category continued to grow
by about 5% in Gb, the world’s largest
cider market. market data show that
consumers are trading up to premium
brands. The considerable investment
behind the magners brand’s premium
quality and image has positioned it
well to take advantage of this trend.
magners brand volumes in Gb grew
by 2.8% during the year and the brand
posted positive revenue growth for
the first time in five years. This was
a considerable achievement given
the arrival of a high profile and well-
resourced new entrant into the market.
Good marketing and innovation were
key factors in our success. brand health
scores remained good. in innovation,
we had a successful launch of magners
Specials, our first variants in the
flavoured category. magners Pear has
delivered another successful year and
magners Golden draught continues
to be rolled out across the on-trade.
This was a positive performance for
magners but we believe that we have
not fully delivered on share of cider
value in Great britain. This will be one
of our objectives for the coming year.
2. HolD EarnInGS In roI
in another difficult year in the irish
market, our objective was once again
to hold earnings. Consumers were
increasingly looking for value, and price
deflation and the shift from the on-
trade to the off-trade affected overall
revenue. bulmers cider brand volumes
and revenues declined but a meaningful
contribution from our beer portfolio
enabled us to achieve stable operating
profits from the irish business.
we achieved our objective by
focusing on two initiatives:
- we increased our investment in price
in the off-trade while continuing
to invest in marketing. The ‘doing
Our bit’ marketing campaign
contributed significantly to bulmers
maintaining its brand position.
- The second element was the
performance of the beer portfolio –
specifically the growth of Tennent’s
in the on-trade and off-trade.
ROi’s economic conditions remain
unpredictable. The deflationary
environment will continue to put
pressure on our business, but
consumption across the irish drinks
sector is broadly stable, which must
be viewed positively as ROi remains a
highly attractive and profitable market.
7
GROUP ChiEf EXECUTivE OffiCER’S REviEw - CONTiNUEd
3. MaInTaIn MoMEnTuM In
InTErnaTIonal MarkETS
Globally it is estimated that over 17
million hectolitres of cider were produced
last year (Canadean). in excess of 40%
of global cider consumption occurs in
markets outside of ireland and the Uk.
in these markets the category typically
represents less than 2% of LAd volumes
but volumes are growing steadily.
with the acquisition of the hornsby’s
cider brand last November, the Group
is now the No.2 cider producer in the
US market, whilst in Australia magners
is the No. 3 cider brand. we continue to
focus on North America and Australia as
we consider that they represent the best
investment opportunities for the Group.
Our North American volumes grew by
25% for the year, a performance which
is line with estimated category growth
rates. The acquisition of hornsby’s gives
us a recognised indigenous US brand
that is complementary to our own irish
and English brands and greatly enhances
our presence in a growing market.
in Canada, where magners volumes
grew by 85%, we entered into a long
term distribution arrangement with
moosehead. in Australia, where magners
volumes grew by 78%, we entered into a
new long term distribution arrangement
with Suntory. both moosehead and
Suntory are highly credible companies
and these relationships offer the
potential for accelerated growth
in fast-growing cider markets.
magners is exported to over 30 countries
worldwide. The markets we supply offer
increasingly positive opportunities and
we are putting significant effort into
growing our international platform.
we broadened the magners range in
Australia and the US to include magners
Selections. Tennent’s also features heavily,
with a new range of export brands.
The growth of the global cider market
puts us in a unique position in terms
of our brands and our intellectual
capital, and we have positioned
ourselves to benefit from the category’s
development and to drive it forward.
4. aCHIEVE opEraTInG
proFIT anD MarGIn GroWTH
FroM TEnnEnT’S
Tennent’s is a very positive story for
the Group.
while reported volumes and revenues
in Tennent’s declined, the underlying
economic performance of Tennent’s
was robust. The Group’s pursuit
of value growth in the off-trade in
Scotland led to a loss of volume
but a significant improvement in
operating profit and margins. in the
independent free trade in Scotland,
the brand continued to excel and
gain share, whilst the expiry of legacy
contracts with on-trade multiples
allowed us to improve margins.
in Northern ireland Tennent’s continued
to perform robustly in the on-trade.
There was substantial loss of volume
in off-trade multiples but positive
growth amongst local groups.
Our significant reinvestment in the
Tennent’s brand, as described below,
is delivering excellent brand health
scores. by investing in the brands, we
are starting to attract more young adults
to the brands. The launch of Caledonia
best in Scotland and Caledonia Smooth in
Northern ireland and ROi has been well
received by customers and consumers.
These premium ales have opened
up a new category for the Group.
Gaymers
The Group’s focus for the Gaymers
portfolio remained on achieving value.
whilst there was a significant reduction in
volume and net revenue, the removal of
low margin activity ensured that earnings
from the Gaymers business contributed in
line with expectations. This leaves room
for improvement in the years ahead.
Manufacturing and production
The supply side of the business has
delivered strongly. The Group was
successful in winning a number of
profitable beer and cider production and
packaging contracts. There has been
good management of input costs and
the price stability achieved has helped
to protect our margins. we milled
a record number of apples – 81,000
tonnes – in ROi and the Uk, and this
offered us some forward protection.
8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
ouTlook
The Group continues to develop and
we are pleased with the progress that
has been achieved during the year. Our
investment case focuses on our long
term ambition to be a leading player
in the growing global cider category.
To achieve such a goal we need a solid
business base – bulmers, magners
and Tennent’s give us that foundation.
C&C is now a focused cider-led LAd
business. while we remain cautious
about the near term prospects of
our core markets, the continuing
global growth of the cider category,
and C&C’s unique position within
the sector, underscore our belief
in the prospects for our business.
C&C’s balance sheet strength and
free cash flow characteristics will
enable us to capitalise on organic and
acquisition growth opportunities.
Stephen Glancey
Group Chief Executive officer
nEW launCHES
Our innovation stream continues to flow,
and the year saw the launch of magners
and bulmers Specials and magners
Selections overseas, Caledonia best and
Caledonia Smooth. These have been
covered under the different markets
above. we are committed to innovation
as new products invigorate our brands
and consumer interest, and maintain
and build presence in our markets.
Since acquisition we have returned
Tennent’s to its quality roots. This is
underlined through our development of
a premium lager – Tennent’s Original
Export – which was launched in April
2012. This draws on an original export
recipe and uses only Scottish barley.
Overseas, we have launched a new range
of Tennent’s products, Tennent’s Scotch
Ale, Tennent’s 1885 and Tennent’s Extra,
focused initially on the italian market.
MarkETInG
Our philosophy is that local brands appeal
to local customers and consumers who
are looking for authentic, quality brands
with a strong heritage. Our marketing
efforts and brand strategies, therefore,
are tailored to reach consumers in each
of our core markets. As such, we are
investing heavily in our key brand assets
to maintain a premium price position
for the brands in the Uk and ROi.
in the Uk, the award-winning ‘method in
the magners’ campaign stretched into
its second year and has continued to
evolve with the new ‘made in the dark’
campaign, maintaining brand awareness
through television advertising, posters
and through digital marketing channels.
in ROi the ‘doing Our bit’ advertising
campaign for bulmers featured
the well known economist david
mcwilliams. The campaign was based
on the ethos of doing something,
no matter how small, for ireland.
The hugh Tennent campaign in Scotland
plays on Tennent’s heritage and the
authenticity of the brand. we continued
our football sponsorships of Glasgow
Rangers and Celtic. The T in the Park
concert is now in its 19th year. in Northern
ireland we once again held the Tennent’s
vital concert after a four year gap.
Our international marketing efforts
focused on a television campaign for
magners in Australia – the first of
its kind – and digital and facebook
campaigns in the United States.
brand health scores remain
high across our core markets,
emphasising both the importance
and success of these campaigns.
pEoplE
The management team of the Group has
evolved during the year. John dunsmore
stepped down from his position as Group
CEO after a highly productive three years
that helped to establish the Group’s success
and direction. The strategy of the business
has not changed and we remain committed
to the long term objectives of the Group.
The team has been strengthened during
the year with the appointment of several
high calibre individuals, thus enabling us
to develop our international capability.
The Group’s management and staff
have worked hard to ensure the ongoing
success of the business and the quality of
our brands. Our remuneration philosophy
focuses on stakeholder participation by
the management team through equity
participation, to align their interests with
those of shareholders. during the year we
revamped the structure of our employee
share and incentive rewards, making them
more relevant to the different levels of
staff. This included introducing partnership
and share matching plans for all
employees alongside the existing Group-
wide bonus incentive scheme for both
managerial and non-managerial staff.
CorporaTE rESponSIBIlITY
As discussed in our Corporate
Responsibility report, we have appointed a
director of Corporate Affairs to spearhead
our Corporate Responsibility agenda.
we have taken an active role in our
trade bodies the National Association
of Cider makers and the british beer
& Pub Association and directly with
government. we have voiced our support
for minimum alcohol pricing as long as
it is fair, proportionate and reasonably
implemented, and is part of an overall
programme to reduce the abuse of
alcohol. Alongside other industry
players we have pledged a reduction of
30 million units of alcohol in the period
to 2015 from the Group’s products.
Our businesses make a substantial
contribution to rural economies in ROi
and the Uk. we have long term purchase
contracts with apple growers in the
west country and are offering long term
barley contracts to farmers in Scotland.
9
OPERATiONS REviEw
diviSiONAL REviEw
CIDEr - rEpuBlIC oF IrElanD (roI)
1 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
©2012 Bulmers Ltd. Bulmers is a registered trade mark
THE WAIT Is OVER
LOW CALORIE. FuLL sTREngTh.
©2011 Bulmers Ltd. Bulmers is a registered trade mark
BuLMERs LIghT
NOW DOES
PINT BOTTLE
Constant Currency(i)
Revenue
Net revenue
- Price /mix impact
- volume impact
Operating profit
FY2012
€m
CIDEr
FY2011
€m
Change
%
BEEr
FY2012 FY2011
€m
€m
Change
%
126.8
91.5
136.4
100.0
42.2
43.2
(7.0)%
(8.5)%
(5.5)%
(3.0)%
(2.3)%
15.8
9.9
13.6
8.8
16.2%
12.5%
(10.5)%
23.0%
2.2*
0.7*
214.3%
Operating margin (Net revenue)
46.1%
43.2%
2.9ppts
22.2%
8.0% 14.2ppts
volume – (khl)
532.4
548.6
(3.0)%
89.6
72.8
23.0%
Re-allocation of marketing investment
to support the brand to ensure off-trade
price competitiveness contributed around
60% of the 2.9ppts margin improvement.
The balance of the margin improvement
is attributed to disciplined cost control.
The bulmers brand health remains
strong. Ongoing investment in advertising
campaigns and the sponsorship of live
music events such as ‘forbidden fruit’ help
to maintain energy and saliency behind the
bulmers brand.
Beer: The Group’s beer portfolio continued
its strong performance in ROi, with volumes
growing 23% in a flat market. Tennent’s
Lager volumes increased 64% year on year
growing impressively in both channels of
trade. Tennent’s Lager draught is pouring
in over 1,000 on-trade outlets, a value
proposition supported by ‘The honest Pint’
campaign. in the off-trade Tennent’s Lager
volumes more than doubled.
The economic environment in ROi remains
challenging and the expectation is that
current trends in the LAd market will
persist. Strong cost focus, continued
innovation and building out of the Group’s
beer portfolio will remain essential to
maintaining operating profit.
* before allocation of Group overheads
laD category(ii): The last 12 months have
seen Long Alcoholic drinks (LAd) volumes
in ROi fall by 1% year on year. As with
the prior year, the swing of consumption
from on-trade to off-trade continues with
Nielsen/CGA reporting positive growth
of 7% in LAd off-trade volumes and a
decline of 6% in on-trade volumes. home
consumption in ROi now accounts for 44%
of total consumption, up from 41% in the
prior financial year. The pricing differential
and increasing levels of promotional activity
in the off-trade remain a key factor in this
accelerated channel switch, a deflationary
trend that we expect to continue over the
next few years. On an aggregate level,
pricing in LAd off-trade fell by 7% in the
year while on-trade pricing remained
relatively flat.
despite the deflationary headwinds in
the off-trade, operating profits in ROi
remained relatively stable for the third year
in succession at €44.4 million. Cider ROi
delivered operating profit of €42.2 million,
while operating profit from the Group’s
beer portfolio increased to €2.2 million.
innovation continued with the recent launch
of Caledonia Smooth, a draught dark beer
currently being rolled out in the on-trade.
Cider: Net revenues were down 8.5% in the
year with volumes accounting for 3.0% of
the decline and price/mix a further 5.5%.
The price/mix deflation reflects the negative
impact of product mix in the on-trade, lower
off-trade pricing and continuing channel
shift to home consumption.
(i) On a constant currency basis, constant currency calculation is set out on page 23
(ii) Source: Nielsen/CGA data
1 1
BULMERS LIGHTNOW DOES PINT BOTTLE
OPERATiONS REviEw - CONTiNUEd
diviSiONAL REviEw
CIDEr - GrEaT BrITaIn (GB)
1 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Constant Currency(i)
Revenue
Net revenue
- Price /mix impact
- volume impact
Operating profit
FY2012
€m
MaGnErS
FY2011
€m
Change
%
GaYMErS
FY2012
€m
FY2011 Change
%
€m
136.4
107.6
131.0
106.8
25.2
23.8
22.3%
745.3
4.1%
0.7%
(2.1)%
2.8%
5.9%
113.4
147.5
(23.1)%
65.2
83.7
(22.1)%
5.1%
(27.2)%
4.3
4.0
7.5%
1.1ppts
6.6%
4.8%
1.8ppts
2.8%
1,152.4
1,582.8
(27.2)%
Operating profits grew by 5.9% to €25.2
million and margins improved by 1.1 ppts
to 23.4% reflecting a continued focus on
operating cost efficiencies. The magners
brand remains in excellent health and
investment levels in marketing were
maintained.
Gaymers portfolio: it was a transitional
year for the Gaymers business. volumes
and net revenues were down 27.2% and
22.1% respectively as the Group sought
to exit unprofitable own-label contracts
during the year. Some of the brands
within the Gaymers portfolio also suffered
volume losses as a direct consequence of
category premiumisation.
despite the volume declines, operating
margins improved by 1.8ppts to 6.6%
due to the stronger economics behind
the remaining volume. Operating profit
increased by 7.5% to €4.3 million for the
year. The repositioned Gaymers business
is now positioned to improve economic
returns through better utilisation of
assets and an increased focus on the
wider cider portfolio.
Operating margin (Net revenue)
23.4%
volume (khl)
765.8
Cider category(ii): The Gb cider market
had another strong year of both volume
and value growth. Per Nielsen/CGA, the Gb
cider market grew 5% in volume terms and
was the only category of alcoholic drinks
to grow volume year on year. New entrants
to the market and fruit variations have had
a premiumising effect and contributed to
attractive retail value growth of 14% for the
category. Traditional ‘standard’ ciders lost
some ground during the year.
Magners: Overall it was a positive year
for the magners brand with revenues
showing positive growth for the first time
in five years. with challenging economic
headwinds, dampening consumer
spending and significant new entrants
into the market, the brand performed
well across both channels of trade. Net
revenue grew 0.7% with volume increases
of 2.8% offsetting the negative price/mix
of 2.1%, attributable to ongoing channel
shift. This performance compares
favourably to the 7.1% negative price/mix
experienced in fy2011.
The trading profile for the financial
year was characterised by a strong
off-trade performance in the spring/
early summer and Christmas trading
period. The on-trade enjoyed continued
growth of magners Golden draught and
magners Pear (now the #1 pear cider in
Gb) providing some relief against further
volume decline for packaged Original,
for which the competition for fridge
space remains a challenge. innovation
continues with three new flavours being
launched under the magners Specials
range in the second half of the year.
(i) On a constant currency basis, constant currency calculation is set out on page 23
(ii) Source: Nielsen/CGA data
1 3
OPERATiONS REviEw - CONTiNUEd
diviSiONAL REviEw
CIDEr - EXporT
1 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
markets
Top S3
Front S2
BackS5
Constant Currency(i)
Revenue
Net revenue
- Price /mix impact
- volume impact
Operating profit
MaGnErS
FY2012 FY2011 Change
%
€m
€m
GaYMErS
FY2012 FY2011 Change
%
€m
€m
HornSBY’S
FY2012
€m
24.7
24.7
21.0
17.6%
21.0
17.6%
3.1
3.1
3.0
3.0
3.3%
3.3%
2.5
2.4
(10.7)%
28.3%
14.3%
(11.0)%
4.5
2.6
73.1%
1.2
1.4
(14.3)%
0.9
Operating margin (Net revenue)
18.2%
12.4% 5.8ppts
38.7%
46.7% (8.0)ppts
37.5%
volume (khl)
153.5
119.6
28.3%
35.4
39.8
(11.0)%
17.8
Revenue growth in magners of 17.6% falls
short of volume growth due to the change
in the structure of the distribution contract
with Suntory, the Group’s distributor in
Australia. Under the terms of the new
arrangement, responsibility for direct
market investment transferred to Suntory
with a consequential reduction in headline
revenue. Total magners Export revenue
growth under the former arrangement
with Suntory would have been circa
29%. Operating margin improvement is
attributed to the lower reported revenue
number, greater absorption of fixed
overheads and operating efficiencies.
Gaymers: despite volume decline of 11.0%
during the year, improved unit pricing
delivered net revenue growth of 3.3%.
Opportunities for international markets
are being reviewed.
Hornsby’s: The acquisition of the
hornsby’s cider brand from E&J Gallo
winery in November 2011 has positioned
C&C as the number 2 cider company in
the US with an estimated 20% share of the
US cider category. The hornsby’s brand
brings US domestic cider heritage to
C&C. Trading is in line with expectations
and integration is well underway. we
expect to exit the transitional services
arrangements within the timescale agreed
with E&J Gallo winery.
Magners: Export growth of magners
accelerated in the second half with
volumes growing by 28.3% for the year
as emerging cider categories in North
America, Australia and Europe continued
to demonstrate good growth.
As anticipated, US cider volume growth
increased in the second half of the year as
an improved autumn trading period helped
drive sales. The US business enjoyed the
benefit of increased investment in sales
infrastructure and extended capability
across both channels and brands.
Canadian volumes continue to grow
strongly and were up 85% for the year,
supported in the second half by a new
distribution agreement with moosehead.
North American volumes grew by 25%
for the year which is line with estimated
category growth rates.
The Australian market, which is a more
developed cider market than North
America, continues to display excellent
growth as imported ciders and flavour
variants recruit consumers into the
category. Penetration rates are now
estimated at 3% of LAd and volumes are
up 30% per annum(ii). magners introduced
above-the-line Tv advertising over the
Australian summer for the first time with
the ‘Catch’ cricket themed campaign.
volume was up 78% for the year. Under
the recently signed five year distribution
agreement with Suntory, marketing
investment in the brand is set to increase
further and the range-extending magners
Selections are being rolled out across the
network.
Front S1
BackS4
(i) On a constant currency basis, constant currency calculation is set out on page 23
(ii) Source: Nielsen/CGA data
1 5
OPERATiONS REviEw - CONTiNUEd
diviSiONAL REviEw
TEnnEnT’S
1 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Constant Currency(i)
Revenue
Net revenue
- Price /mix impact
- volume impact
Operating profit
FY2012
€m
TEnnEnT’S
FY2011
€m
Change
%
THIrD parTY BranDS
FY2012
€m
FY2011 Change
%
€m
216.8
100.1
223.9
102.0
22.3
18.2
(3.2)%
(1.9)%
6.9%
(8.8)%
22.5%
77.9
74.0
83.5
76.1
(6.7)%
(2.8)%
0.2%
(3.0)%
7.1
9.6%
391.8
5.8
22.4%
7.6%
2.0ppts
403.8
(3.0)%
Operating margin (Net revenue)
22.3%
17.8%
4.5ppts
volume (khl)
1,421.7
1,559.7
(8.8)%
Scottish beer market(ii): The Scottish
beer on-trade market remains in decline
with total beer volumes falling 8% for the
year according to Nielsen/CGA. Scottish
off-trade beer volumes declined by 4% in
volume but grew by 5% in value.
Tennent’s: The Tennent’s brand delivered
a strong set of numbers for the year with
operating margins increasing to 22.3%, a
level comparable to the magners brand
in Gb. Net revenues fell by 1.9% as a
consequence of the volume lost in pursuit
of improved unit pricing in the off-trade.
Total volumes fell by 8.8% with the
positive impact of price/mix contributing
6.9% to the net revenue line. during the
financial year, the Group commenced
exporting Tennent’s brands to overseas
markets including Australia, italy, North
America and Russia and launched
Tennent’s Original Export, a premium
lager, in April 2012.
Tennent’s Scotland: Tennent’s
outperformed the on-trade market with
a decline of 2% as the brand continues
to build momentum across the Scottish
market. in the independent free trade (ifT)
in Scotland, Tennent’s is now back in net
revenue growth as distribution gains and
a growing loan book lifted volumes 1% in
the year. The Group continues to invest in
the on-trade to secure distribution with
€11 million advanced to customers over
the course of the year. Our cider business
is also performing well in the on-trade,
benefitting from the Tennent’s reach. The
C&C cider portfolio now accounts for 31%
of the Scottish on-trade draught cider
market. in the off-trade Tennent’s volumes
declined 16% as a result of the Group’s
pursuit of value growth.
Ongoing commitment to brand investment
is evidenced by good brand health scores.
Sponsorship of The Old firm football clubs
and ‘T in the Park’ music festival continue
to energise the Tennent’s brand and
improve engagement with the trade and
consumers. The launch of Caledonia best
in the fourth quarter was well received in
the on-trade and the product has been
rolled out to over 1,000 points of sale
across Scotland.
Tennent’s nI: in Northern ireland
Tennent’s continued to perform robustly in
the on-trade. There was substantial loss of
volume in off-trade multiples but positive
growth amongst local groups.
operating Efficiencies: The focus on cost
control, delivery of synergies and improved
unit pricing on Tennent’s contributed to
a significant uplift in operating margins
to 22.3%. The supply side of the business
delivered a robust cost performance
and incremental third party volumes
helped to offset low level input cost
increases. during the year, a bottling
line was relocated from the Group’s cider
manufacturing facility in Clonmel to
wellpark brewery in Glasgow, enhancing
the brewery’s capability to service both
planned innovation for the Tennent’s
brand and growing demand for third party
activity.
Third party brands: Continued to perform
well with operating profit growth of 22.4%
reflecting improved product mix and the
strength of the portfolio in Scotland and
Northern ireland.
(i) On a constant currency basis, constant currency calculation is set out on page 23
(ii) Source: Nielsen/CGA data
1 7
GROUP ChiEf fiNANCiAL OffiCER’S REviEw
rESulTS For THE YEar
C&C is pleased to report net revenue of €480.8 million, operating profit
from continuing operations of €111.2 million and adjusted diluted EPS for
continuing operations of 27.6 cent.
On a constant currency basis, this translates to a net revenue decline of
4.8% (reported basis: decline of 5.7%) but an operating profit increase of
9.0% (reported basis: up 10.2%) equating to an operating margin of 23.1%,
an increase of 2.9 percentage points on the prior year (3.3 percentage
points on a reported basis).
The achievement reflects both the Group’s commitment to continued
cost management and its strategy of capitalising on brand strength by
the pursuit of value.
financial capacity
to achieve
growth
objectives
1 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Table 1 – key financial indicators
Financial Summary
Net revenue
EbiTdA (i)
Adjusted diluted EPS
free cash flow (ii)
free cash flow conversion ratio
Net cash/(debt) (iii)
dividend per share
dividend cover
Financing
Net interest paid
interest Cover
Net debt/EbiTdA
Net debt as percentage of market capitalisation
Share price performance
Share price at 29/28 february
52 week high
52 week low
market capitalisation at year end
2012
2011
€m
€m
Cent
€m
€m
Cent
€m
480.8
131.4
27.6
102.6
78.1%
68.3
8.17
29.6%
3.9
34.6
-
n/a
509.9
126.3
25.4
106.8
84.6%
(6.3)
6.6
26.0%
7.1
17.8
0.07
0.5%
€3.665
€3.69
€2.70
€3.535
€3.60
€2.75
€m
1,243
1,192
(i) EbiTdA: Earnings before exceptional items, interest, tax, depreciation and amortisation and inclusive of discontinued operations.
(ii)
free Cash flow is a non-GAAP measure that comprises cash flow from operating activities net of capital investment cash outflows which form part of investing
activities. free Cash flow highlights the underlying cash generating performance of the ongoing business.
(iii) fy2011 Net debt is net of prepaid issue costs of €0.3 million and excludes the fair value of swap instruments amounting to a liability of €2.0 million.
The equivalent balances for fy2012 were nil.
The performance of each of the Group’s
reporting segments is discussed in
detail in the Operations Review on pages
10 to 17, in summary the key drivers of
this financial performance were:-
• a good earnings performance from roI:
despite continued price deflation as a
result of growing home consumption
and increased promotional activity in
the off-trade; the Group achieved stable
earnings with increased operating profit
contribution from beer compensating for
reduced cider earnings,
• Stabilisation of Magners performance
in GB: despite increased competition,
magners experienced volume growth
for the first time in five years, increasing
2.8%. On constant currency basis, net
revenue grew 0.7% reflecting increased
volumes and price stabilisation, as
offset by the negative impact of channel
mix. Operating margins improved
1.1ppts to 23.4%,
• Encouraging volume and operating
profit growth in the Group’s export
business with magners export volumes
up 28% and operating profit increasing
from €4.1 million to €6.6 million, of
which the newly acquired hornsby’s
brand contributed €0.9 million,
• Strong Tennent’s performance: the
pursuit of value and improved pricing
for Tennent’s in the off-trade channel
had a negative impact on volume and
net revenue but resulted in significant
operating profit and margin growth
for the Tennent’s brand, on a constant
currency basis up 22.5% and 4.5ppts
respectively,
• Continued commitment to brand
investment: marketing investment
remains at 10% of net revenue with
increased investment in developing
markets partially offsetting reduced
investment in mature markets as the
Group competes on price in a tough
environment.
• EpS growth ahead of operating profit
growth reflecting reduced finance costs
following debt repayment,
• Currency: applying this year’s effective
rates to last year’s operating profit
improves fy2011 reported profits
by a net €1.1 million as a result of a
strengthening in the sterling effective
transaction rate which was partially
offset by a weakening in the effective
translation rate.
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
European Union, which comprise
standards and interpretations approved
by the international Accounting
Standards board (iASb) and the
international financial Reporting
interpretations Committee (ifRiC),
applicable irish law and the Listing
Rules of the irish and London Stock
Exchanges. details of the basis
of preparation and the significant
accounting policies are outlined on
pages 67 to 77.
FInanCE CoSTS, InCoME TaX
anD SHarEHolDEr rETurnS
Net finance costs reduced to €5.1million
(2011: €9.4 million) reflecting a reduction
in average drawn debt levels and the
associated reduction in issue cost
amortisation charges, the benefit of
which was partially offset by an increase
in effective interest rates. The average
interest rate paid was 3.4% (2011: 2.5%)
reflecting the increased weighting of debt
subject to an ‘out of money’ fixed rate swap
contract. On a time weighted basis average
drawn debt reduced from €305 million
during fy2011 to €92 million in fy2012.
Net finance costs are also inclusive of an
unwind of discount on provisions charge of
€1.0 million (2011: €1.0 million).
The income tax charge in the year
relating to continuing activities and
excluding exceptional items amounted
to €13.8 million giving an effective tax
rate of 13%, an increase on the prior
year primarily due to the expiration of
manufacturing relief in ROi. The low
effective tax rate reflects the residency
of the Group’s brand owning companies,
with the majority of the Group’s taxable
profits continuing to arise in ROi.
1 9
ChiEf fiNANCiAL OffiCER’S REviEw - CONTiNUEd
Total dividends paid to ordinary
shareholders in the current financial
year amounted to €22.7 million of
which €18.5 million was paid in cash
while €4.2 million or 18% (2011: 40%)
was settled by the issue of new shares.
Subject to shareholder approval, the
proposed final dividend of 4.5 cent per
share will be paid on 13 July 2012 to
ordinary shareholders registered at the
close of business on 25 may 2012. The
Group’s full year dividend will therefore
amount to 8.17 cent per share, a 23.8%
increase on the previous year. The
proposed full year dividend per share
will represent a payout of 29.6% (2011:
26.0%) of the full year reported adjusted
diluted earnings per share. A scrip
dividend alternative will be available.
EXCEpTIonal ITEMS
The Group posted to operating profits
a net income of €3.1 million before tax
in relation to a number of items which
due to their nature and materiality
were classified as exceptional items
for reporting purposes; a presentation
which in the opinion of the board
provides a more helpful analysis of the
underlying performance of the Group.
The items which were classified as
exceptional include:-
(a) retirement benefit obligations: as
discussed later the Group’s pension
reform programme concluded with
the receipt from the Pensions board
of a Section 50 direction to remove
guaranteed pensions in payment
increases. This resulted in the
recognition of a past service gain
net of expenses of €14.7 million,
calculated as the difference in the
value of liabilities assuming an average
discretionary increase rate of 2.25% per
annum as opposed to the previously
guaranteed 3% per annum on pensions
in payment.
The Group also earned a curtailment
gain of €0.1 million arising as a
result of the Group’s disposal of its
Northern ireland wholesale business
and the reclassification of these
employees from active to deferred
members.
(b) restructuring costs: comprising
severance and other initiatives arising
from ongoing cost management
initiatives resulted in an exceptional
charge before taxation of €4.6 million
(2011: €4.9 million).
(c) IT Systems implementation &
integration costs of €4.0 million:
primarily relating to the migration of
the Gaymers Cider business onto a
new iT system enabling the business
to fully integrate with the Group’s
magners business in England and
wales.
(d) loss on revaluation of property,
plant & machinery: in line with
the Group’s policy to recognise
its freehold properties and plant
& machinery at fair value on the
balance Sheet, the Group engaged
external consultants to complete a
valuation as at 29 february 2012. This
exercise resulted in a net revaluation
loss of €2.0 million being accounted
for in the income Statement, and
a further net loss of €1.7 million
accounted for in other comprehensive
income on the basis that it created
a revaluation surplus in respect
of the Group’s Scottish buildings
and reduced a revaluation surplus
previously recognised in respect of
other assets.
(e) loss from discontinued operations:
a loss of €1.1 million was realised,
of which €0.1 million profit arose on
the disposal of the Group’s Northern
ireland wholesaling business (quinns
of Cookstown) to britvic Northern
ireland Limited on 30 June 2011
for a gross consideration of €4.8
million (£4.3 million) and the balance
in relation to a working capital
settlement to reflect ‘normalised’
working capital’ as set out in the Sale
and Purchase Agreement following
the prior year disposal of the Group’s
Spirits & Liqueurs business.
The Group also recognised a loss of
€0.7 million on recycling a foreign
currency reserve balance to the
income Statement following the
disposal of its Northern ireland
wholesaling business.
(f) Inventory recovery: juice stocks
which were previously impaired were
recovered and used by the Group’s
cider business during the current
financial year resulting in a write back
of juice stocks to operating profit at
their recoverable value of €0.7 million.
As the original impairment charge
was accounted for as an exceptional
cost the write-back has also been
accounted for in this manner.
BalanCE SHEET STrEnGTH,
DEBT ManaGEMEnT anD
CaSHFloW GEnEraTIon
A key strength of the Group, and one
which leaves the Group ideally placed
to invest in its brands, business and
customer base, and, to access growth
potential in what is a challenging
economic and financial climate, is the
strength of its balance sheet.
Total assets reported by the Group were
€960.8 million at 29 february 2012. The
Group’s portfolio of market leading brands
and related goodwill is valued at €483.3
million. brand values and goodwill are
assessed for impairment on a regular
basis with the directors concluding that no
material adjustments to the assumptions
underlying the impairment testing models
applied would result in any foreseeable
risk of an impairment arising.
in addition, the Group generated free
Cash flow of €102.6 million in the period,
reflecting an EbiTdA to free Cash
flow conversion ratio of 78.1% which is
comfortably within the Group’s target
range of 70%-80%, enabling it to achieve a
year end net cash position of €68.3 million.
As discussed below, the Group also had
undrawn committed facilities available of
€375 million at the year end date.
Debt management
The Group substantially reduced its
drawn debt, during the current financial
year, repaying its maturing sterling debt
facility and reducing the drawings under
its primary euro debt facility to €60
million. This facility was subsequently
voluntarily repaid and cancelled on 30
march 2012, in advance of the may 2012
maturity date. All debt repayments were
financed from surplus cash resources.
in february 2012, the Group entered into
a committed €250 million multi-currency
five year syndicated revolving loan facility
with seven banks, repayable on 28
february 2017. The facility agreement
provides for a further €100 million in
the form of an uncommitted accordion
facility and permits the Group to avail
of additional indebtedness, excluding
working capital and guarantee facilities,
to a maximum value of €150 million.
Consequently, the Group is permitted,
under the terms of the agreement, to
have debt capacity of €500 million.
2 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Table 2 – Cash flow summary
Operating profit (i)
Amortisation/depreciation
EBITDa (ii)
working capital
Net capital expenditure
Net finance costs
Tax paid
Exceptional items paid
Other *
Free cash flow(iii)
free cash flow conversion ratio
Proceeds on disposal of operations
Proceeds from exercise of share options and issue of new
shares under Joint Share Ownership Plan
Consideration / costs of acquisitions
dividends paid in cash
reduction in net debt
Net debt at beginning of year
Translation adjustment
Non cash movement
net cash/(debt)(iv) at end of year
2012
€m
111.1
20.3
131.4
8.0
(17.7)
(3.9)
(4.4)
(8.7)
(2.1)
2011
€m
105.0
21.3
126.3
31.5
(21.1)
(7.1)
(8.4)
(13.5)
(0.9)
102.6
78.1%
106.8
84.6%
4.7
294.9
1.6
(16.6)
(18.5)
4.8
(31.7)
(12.1)
73.8
362.7
(6.3)
1.1
(0.3)
68.3
(364.9)
(2.6)
(1.5)
(6.3)
*
other relates to the share options add back, pensions charged to operating profit before exceptional items less contributions paid and profit on disposal of
plant &equipment
(i) before exceptional costs and inclusive of discontinued activities
(ii) EbiTdA: Earnings before exceptional items, interest, tax, depreciation and amortisation and inclusive of discontinued operations
(iii) free Cash flow is a non-GAAP measure that comprises cash flow from operating activities net of capital investment cash outflows which form part of investing
activities. free Cash flow highlights the underlying cash generating performance of the ongoing business.
(iv) fy2011 Net debt is net of prepaid issue costs of €0.3 million and excludes the fair value of swap instruments amounting to a liability of €2.0 million. The equivalent
balances for fy2012 were nil.
UNGEAREd bALANCE
ShEET SUPPORTEd
by NEw €250 miLLiON
fiNANCiNG fACiLiTy
Cash generation
management reviews the Group’s cash
generating performance by measuring
the conversion of EbiTdA to free Cash
flow as we consider that this metric
best highlights the underlying cash
generating performance of the ongoing
business.
The Group ended the year with a strong
EbiTdA to free Cash flow conversion
ratio of 78.1% (2011: 84.6%) principally
reflecting:-
• a reduction in financing costs driven by
reduced levels of drawn debt,
The prior year’s free cash flow
conversion rate benefited from a one-
off positive working capital benefit
arising from the timing of cashflows
transferring to the Group from Ab
inbev under the transitional services
arrangement.
The high level of cash generation
coupled with the availability of finance
under the terms of the debt facility
provides the Group with significant
financial flexibility to enhance earnings
growth through accretive acquisitions
and/or return cash to shareholders.
• reduced corporation tax payments
following a prior year overpayment,
A summary cash flow statement is set
out in Table 2.
• on-going focus on working capital
management,
• low capital investment: the current
year capital investment included the
costs of transferring a bottling line
from the Group’s cider manufacturing
facility in Clonmel to Glasgow providing
the brewery with bottling capacity.
2 1
ChiEf fiNANCiAL OffiCER’S REviEw - CONTiNUEd
rETIrEMEnT BEnEFIT
oBlIGaTIonS
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 Group balance sheet as
retirement benefit obligations.
The Group’s ROi defined benefit
pension schemes experienced funding
difficulties in recent years owing to poor
investment performance, low interest
rates and continued improvements in
life expectancy, resulting in the Group
concluding that the scale of financial
risks associated with funding the
schemes in a deflationary and austere
environment were unsustainable.
Consequently, the Group worked
with the Pension Scheme Trustees to
implement pension reform in order to
manage the Group’s funding risk. The
process concluded with the Pensions
board issuing a Section 50 directive to
remove the mandatory pension increase
rule, which guaranteed 3% per annum
increase to certain pensions in payment,
and replace it with guaranteed pension
increases of 2% per annum for each
of the 3 years 2012, 2013 and 2014 and
thereafter future pension increases to be
awarded on a discretionary basis.
A funding Proposal was also approved
by the Pensions board which sees the
Group commit to contributions of 14%
of Pensionable Salaries (fy2011: 38.1%
of Pensionable Salaries) to fund future
pension accrual of benefits, a deficit
contribution of €3.4m and an additional
supplementary deficit contribution of
€1.9m for which C&C reserves the right
to reduce or terminate if on consultation
with the Trustees and on advice from
the Scheme Actuary that it is no longer
required due to a correction in market
conditions. The level of future funding
commitment is in line with current
funding levels. The directors believe that
the agreed plan will enable the schemes
to meet the minimum funding Standard
by 31 december 2016.
At 29 february 2012, the retirement
benefit obligations on the iAS 19 basis
amounted to €15.1 million gross and
€13.2 million net of deferred tax (2011:
€15.3 million gross and €13.3 million
net of deferred tax). The movement in
the deficit is as follows:-
deficit at 1 march 2011
Employer contributions paid
Actuarial loss
Past service gain/curtailment gain
Charge to the income Statement
Net deficit at 29 february 2012
€m
15.3
(5.9)
19.0
(14.9)
1.6
15.1
Although, the retirement benefit deficit
computed in accordance with iAS 19 did
not change materially from the prior
year, the deficit was impacted by a
number of factors, namely:-
• actuarial loss: €19.0m recognised as
a result of a reduction in the discount
rate applied to liabilities (ROi schemes):
reduced from 5.3% - 5.5% at 28
february 2011 to 4.7% - 4.9% at 29
february 2012),
• Past service gain: €14.8m arising on
elimination of the guaranteed pensions
in payment increases and reflecting
the difference between liabilities valued
using a pension increase assumption
of 3% per annum versus 2.25% per
annum (assumed to be the average
discretionary pension increase rate)
• Employer contributions: €5.9 million
All other significant assumptions applied
in the measurement of the Group’s
pension obligations at 29 february 2012
are consistent with those as applied at
28 february 2011.
FInanCIal rISk ManaGEMEnT
The most significant financial market
risks that the Group is exposed 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 is 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
financial statements.
Debt and interest rate risk management
it is Group policy to ensure that a
structure of medium/long term debt
funding is in place to provide it with
the financial capacity to promote the
future development of the business and
to achieve its strategic objectives. The
Group manages its borrowing ability
by entering into committed loan facility
agreements and as discussed earlier
successfully completed negotiations on
a committed five year debt facility with
seven banks, including bank of ireland,
bank of Scotland, barclays bank, danske
bank, hSbC, Rabobank, and Ulster bank
providing the Group with committed debt
capacity of up to €250 million.
The Group seeks to manage its interest
rate risk by hedging an appropriate
portion of future interest rate risk
through the use of interest rate swap
agreements converting variable rate
debt to fixed rates. The Group had drawn
debt of €60 million at the year end which
was subsequently repaid on 30 march
2012 and had no outstanding interest
rate swap agreements.
The Group’s cash deposits are all
invested on a short term basis with
banks who are members of the Group’s
banking syndicate.
Currency risk management
The Group publishes its consolidated
financial statements in euro but transacts
business in other currencies. by entering
into foreign currency transactions and
by the consolidation of the results of its
non-euro reporting foreign operations the
Group is exposed to both transaction and
translation foreign currency rate risk.
The Group hedges a portion of its
exposure to the sterling value of its
foreign operations by designating sterling
borrowings as net investment hedges
and enters into forward rate hedge
agreements to hedge an appropriate
portion of the transaction exposure
borne by its subsidiary undertakings for a
period of up to two years ahead. Currency
transaction exposures primarily arise on
the sterling and US dollar denominated
sales of its euro subsidiaries.
The principal foreign currency forward
contracts in place at 29 february 2012 are:
foreign Currency
Amount (m)
Average forward rate
(Euro:fX)
Sterling
uSD
35.0
1.0
0.86
1.32
where hedge accounting is applied,
hedges are documented and tested for
effectiveness on an ongoing basis. All
interest rate swaps and currency hedges
are based on forecasted exposures
and meet the requirements of iAS 39
financial instruments: Recognition
2 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Table 3 – Constant Currency Comparatives
Year ended
28 February 2011(i)
revenue
Cider – ROi
Cider – Gb
Cider – Ni
Cider – Export
Tennent’s
Third party brands
Total
net revenue
Cider – ROi
Cider – Gb
Cider – Ni
Cider – Export
Tennent’s
Third party brands
Total
operating profit
Cider – ROi
Cider – Gb
Cider – Ni
Cider – Export
Tennent’s
Third party brands
Total
€m
136.4
281.6
15.7
24.5
227.2
84.6
770.0
100.0
192.2
12.6
24.5
103.5
77.1
509.9
43.7
25.6
3.1
4.1
18.5
5.9
100.9
FX
Transaction
€m
FX
Translation
€m
Year ended
28 February 2011
Constant currency
comparative
€m
-
-
-
(0.5)
-
-
(0.5)
-
-
-
(0.5)
-
-
(0.5)
(0.5)
2.3
(0.1)
(0.1)
-
-
1.6
-
(3.1)
(0.2)
-
(3.3)
(1.1)
(7.7)
-
(1.7)
(0.2)
-
(1.5)
(1.0)
(4.4)
-
(0.1)
-
-
(0.3)
(0.1)
(0.5)
136.4
278.5
15.5
24.0
223.9
83.5
761.8
100.0
190.5
12.4
24.0
102.0
76.1
505.0
43.2
27.8
3.0
4.0
18.2
5.8
102.0
(i) Continuing operations i.e. excluding Revenue, Net revenue and Operating profit of the Group’s discontinued Ni wholesaling business
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.
kenny neison
Group Chief Financial officer
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. The Group does 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. it is Group policy
to fix the cost of a certain level of its
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. The Group has over 60 long
term apple supply contracts with farmers
in the west of England and has an
agreement with malt farmers in Scotland
for the supply of malt.
and measurement to qualify as cash
flow hedges. The fair value of all
outstanding hedges at 29 february 2012
as calculated by reference to current
market value amounted to a net liability
of €0.8 million (2011: €1.7 million net
liability) and this has been included on
the balance sheet under “derivative
financial assets and liabilities”.
The effective rate for the translation of
results from foreign currency operations
was €1:£0.87 (year ended 28 february
2011: €1:£0.85) and the effective rate
for the translation of foreign currency
revenue/net revenue transactions
resulting in an effective rate of €1:£0.85
(year ended 28 february 2011: €1:£0.88)
at operating profit level.
Comparisons for revenue, net revenue
and operating profit for each of the
Group’s operating 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 denominated
subsidiaries by restating the prior year
at fy2012 effective rates. Applying the
realised fy2012 foreign currency rates
to the reported fy2011 revenue, net
revenue and operating profit rebases the
comparatives as shown in Table 3.
2 3
CORPORATE RESPONSibiLiTy
HIGHlIGHTS
in the year ended 29 february 2012 the Group has:
• rEDuCED ToTal uSaGE oF ElECTrICITY BY 3.4% anD ToTal uSaGE oF naTural
GaS BY 2.7%.
• rEDuCED THE ToTal nuMBEr oF HGV DElIVErIES In IrElanD anD In THE uk
rESulTInG In a CarBon rEDuCTIon oF approXIMaTElY 133 TonnES.
• rEDuCED roaD MIlEaGE FroM SupplIErS In SCoTlanD BY alMoST 21%
THrouGH InCrEaSED loCal SourCInG oF THE BarlEY uSED In our BrEWInG
proCESSES.
• SIGnIFICanTlY rEDuCED THE aMounT oF WaSTE THaT WE SEnD To lanDFIll.
• rEDuCED ToTal WaTEr ConSuMpTIon BY 8%.
• rEDuCED WaTEr ConSuMpTIon To 3.43 HECTolITrES oF WaTEr uSED pEr
HECTolITrE (Hl/Hl) oF proDuCT proDuCED, SIGnIFICanTlY BEloW THE
rECoGnISED GloBal BrEWInG BEnCHMark oF 4 Hl/Hl.
• puBlIClY SupporTED propoSalS For THE InTroDuCTIon oF MInIMuM unIT
prICInG oF alCoHol.
2 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
SuSTaInaBIlITY proGraMME
Carrying out our business in a sustainable way benefits us, our stakeholders,
the community and the environment. Sustainability not only reduces our costs
but also reduces the impact that our business has on the environment.
InTroDuCTIon
we operate a Group-wide corporate
responsibility and sustainability strategy.
A director of Corporate Affairs has been
appointed to oversee the development
and implementation of this strategy.
EnVIronMEnTal IMpaCT
& EnErGY
At each of the Group’s manufacturing
facilities we have set up energy reduction
teams who seek to reduce our impact
on the environment, looking at ways
of reducing energy and raw material
consumption, waste going to landfill,
and emissions, and ways of increasing
transport efficiency and packaging
optimisation. Each team reports
monthly to the Group manufacturing
director, who reports through the
Group Chief Executive to the board.
we continue to target the impact that
our manufacturing operations have on
the environment. Annual targets are
established across all manufacturing sites
to monitor and direct energy usage, water
consumption and effluent discharge.
Compared with fy2011, we have
reduced our electricity usage from
40.44 million kwh to 39.07 million
kwh, and we have reduced our natural
gas usage from 94.93 million kwh to
92.34 million kwh. we are committed
to further reducing our electricity and
natural gas usage and have developed
a reduction target of 11% by the end of
fy2015, against fy2012 as a base year.
Sustainable management of our logistics
operations has led to savings in the
numbers of deliveries we make by road
to our customers. during fy2012 we
have worked closely with our delivery
contractors to increase loadfill efficiencies.
On deliveries from our facility at Clonmel
in ROi to our national distribution centre
(NdC) in bristol, we increased the average
number of pallets on each load from 24
to 26; on deliveries to customers within
ROi we improved from 19 to 22 pallets
and on deliveries from our facility at
Shepton mallet and the NdC to customers
within the Uk we went from 19.5 to 22
pallets. Together with other measures
this reduced the distances travelled
by around 200,000 km with a carbon
reduction of approximately 133 tonnes. in
addition in Scotland, through increased
local sourcing of the barley used in our
brewing processes, we have reduced the
number of miles travelled by our suppliers
by 21%, resulting in a further carbon
reduction of approximately 60 tonnes.
Our manufacturing sites comply with
local emission permits and are inspected
by national enforcing agencies to assess
compliance. Each site has an approved
Environmental Aspects Register and a risk
assessment model. following a technical
breach of the Greenhouse Gas Emissions
Trading Scheme Regulations 2005, in
december 2011 a C&C subsidiary received
a civil penalty of £30,390 from SEPA (the
Scottish Environment Protection Agency).
This related to minor under-reporting
of emissions from three small boilers at
the wellpark brewery, which, together,
constituted less than 2% of the brewery’s
overall emissions. The emissions and
the failure to report them occurred in
2008 and 2009, and were reported to
SEPA as soon as they were discovered
following our acquisition of the brewery
in September 2009. This issue has now
been resolved fully to SEPA’s satisfaction.
Our cider manufacturing facilities at
Clonmel and Shepton mallet have been
accredited with the Environmental
management Standard iSO 14001, and
the facility at Clonmel continues to be
accredited to the irish Energy Standard
iS EN 16001:2009. in order to obtain
accreditation to these Standards, we
have had to demonstrate that we have
put in place systems and processes
to provide significant energy usage
reductions that result in an associated
decline in costs and greenhouse gas
(GhG) emissions through the systematic
management of energy. The brewery at
wellpark continues to meet its regulatory
targets, operating within the European
Union Emissions Trading Scheme.
As members of the british beer and
Pub Association (bbPA), we participate
in energy reduction initiatives,
surveys and seminars. Our cider
manufacturing facility at Clonmel
works closely with the Sustainable
Energy Authority of ireland (SEAi).
S
A
S
t
h
t
5
N
T 4
N
U
J U
h
E
B
I Q U E M U S I C FESTIVAL 3 STAGES
T
U
O
JUNE
BANK HOLiDAY
WEEKEND
Perfect for
roaming the meadow
like WILD BEASTS.
G r
l o
v
r
i e
,
V
s
k
c
B e
a
a b
u l ’
a
t h e
t h
w i
y
l
e
S A N D W I C H .
H A M
‚Get your FLAMING L IPS
to Core Bar for a
refreshing Bulmers Drau ght.
E D E N
Q U A Y
Forget the AEROPLANE,
you’ve got a free ticket to ride.
Undergrowth
movement? JAMIE XX
marks the spot.
No BATTLES,
enjoy another free ride
with your APHEX TWIN.
FESTIVAL
ROYAL HOSPITAL KILMAINHAM
At Bulmers we believe in ‘Doing our Bit’.
So, as well as putting on the Forbidden Fruit Festival,
we’re giving all ticket holders an added pick-you-up.
Look out for the Bulmers Bus, as it shuttles up and down the
quays, then simply show your ticket to enjoy a FREE RIDE.
1 free bus,2 days, 3 stages - millions of fun!
Over 18’s only
T H E
R o y a l
H o s p i t a l
K i l m a i n h a m
2 5
CORPORATE RESPONSibiLiTy - CONTiNUEd
Awareness training ensures that
all personnel are familiar with our
environmental policy and our business’s
environmental impact and the relevance
of the Environmental management
Systems on each manufacturing site.
paCkaGInG
we continue to look for ways to reduce
the weight of our packaging. measures
this year include increasing the size of
delivery of raw materials, consolidating
the ordering of packaging materials
across our manufacturing facilities,
decreasing our stretchwrap usage on
pallets, light-weighting PET bottles,
light-weighting bottle crowns at Clonmel,
continuing further light-weighting of
other packaging items and moving all
glass bottles to ‘Load hog’ layer pads.
CarBon ConSuMpTIon
The Group continuously monitors the
impact of its operations on the climate
and we look to reduce our emissions.
we assess and manage climate change
related risks and opportunities, including
the impact on the availability and security
of our sources of raw materials, such
as aquifers, orchards and maltings.
whilst there is a risk that climate
change may affect the availability
and price of apples and other natural
ingredients, we do not expect this risk
to increase materially in the short
term. fossil fuel prices are likely to
increase but to offset this we will
seek increasing energy efficiency.
we measure our Scope 1 emissions
(direct GhG emissions from fuel
combustion), Scope 2 emissions (indirect
GhG emissions from consumption of
purchased electricity etc.) and Scope
3 emissions (other indirect emissions,
such as purchased materials and supply
chain emissions) in respect of all of
our manufacturing sites and corporate
offices. This is done in accordance with
the Greenhouse Gas Protocol (GhG
Protocol), the international accounting tool
to quantify and manage GhG emissions.
The wellpark brewery has been in the
Climate Change Levy (CCL) Scheme for
many years, and all our operations in
the Uk continue to be registered for the
CRC Energy Efficiency Scheme. The CRC
scheme features a range of reputational,
behavioural and financial drivers to
develop energy management strategies.
we actively target areas for reduction of
our Scope 1 and 2 emissions. we have also
measured the carbon footprint of key cider
products over the entire product lifecycle,
and used this to progress further carbon
reductions in our external emissions.
we seek to build on the success of the
weight reduction of our packaging and the
optimisation of our logistics operations.
in ROi, we recovered approximately
3,300 tonnes of CO2 produced by
the cider fermentation process and
used it to carbonate our products.
in addition, we have capped the
amount of g/km of CO2 on all new
company cars which will result in
a reduction of 100 tonnes of CO2
emitted by our fleet each year.
we also participate each year in the
Carbon disclosure Project (CdP) Supply
Chain Programme across the whole
Group. GhG emissions for the Group are
evaluated annually and posted on the CdP
website. further information on the CdP,
including a copy of the CdP ireland Report
2011, is available at www.cdproject.net.
WaSTE
we have systems in place to maximise
the recycling of the waste that we
produce and minimise what we send to
landfill. Our ultimate goal is to recycle
or recover for reuse 100% of our waste
products. in fy2012, our manufacturing
sites reduced the overall amount of
waste sent to landfill by over 60%.
At Clonmel, we maintained our recovery
and recycling rate of 99.2%. The amount
of waste sent to landfill dropped from
38 tonnes in fy2011 to 19 tonnes in
fy2012, a 50% reduction. At Shepton, our
recovery and recycling rate was 84.2%.
The amount of waste sent to landfill
dropped from 92 tonnes in fy2011 to 57
tonnes in fy2012, a 38% reduction.
At wellpark, we have been taking
measures to ensure preparedness for the
new Zero waste Regulations announced
by the Scottish Government, and no waste
is sent directly to landfill. in fy2012 just
under 60% of the waste produced at
wellpark was segregated at source for
recycling. The remainder was sent to a
third party waste management provider
for source segregation and recycling and
disposal. we have not been able to obtain
accurate data for how much of this is
recycled and are therefore working closely
with our waste management provider to
obtain accurate data for this coming year.
in order to ensure that our products
comply with relevant packaging waste
regulations, our Uk manufacturing
facilities are members of valpak and
our facility in Clonmel is a member
of Repak. Annual submissions of
our total sales are made to these
organisations and these submissions
are available for external audit.
WaTEr
The Group’s manufacturing sites are
not located in any region identified as
prone to drought, and water scarcity
is not considered to be a critical risk
for our business. Nevertheless, water
preservation and management is an
important business consideration for the
Group and we continue to monitor the
usage of water per hectolitre of finished
product from each manufacturing
facility and across our supply chain.
The Group is participating in the 2012
CdP water disclosure initiative, which
will include data on water usage from
all of our manufacturing facilities. The
results of this year’s report will be posted
on the CdP website later in 2012.
in fy2012, our total water usage
was 16.32 million hectolitres, a
reduction of 8% on fy2011. This
implies total water consumption of
3.43 hectolitres of water used per
hectolitre (hl/hl) of product produced,
significantly below the recognised
global brewing benchmark of 4 hl/hl.
Our continuing aquifer protection
programme in Clonmel has resulted in
us retaining our successful accreditation
to the irish iS 432:2005 Spring water
standard. Across the Group, we continue
with our projects on brewery condensate
recovery, reclaiming pasteuriser, bottle
rinse water, fruit processing, and
minimising plant and process cleaning
systems. At Clonmel, we treat waste
water at our anaerobic wastewater
treatment plant and we use biogas, a by-
product, to fuel the boilers used on site.
proCurEMEnT
we have a sustainable and ethical
procurement policy in place, the
implementation of which is regularly
monitored by the board via the Group
manufacturing director. To demonstrate
compliance with this policy, each
business unit is required to provide
access to its audit and review records,
its procedure manuals and its staff
training materials for audit purposes.
2 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Our procurement policy states that our
purchasing and procurement decisions
should consider whole life cost and the
associated risks and implications for
society and the environment. Appropriate
sustainability requirements are specified in
initial tender documentation for suppliers.
we seek to establish key performance
indicators for sustainable procurement
and to have compliance monitoring rights.
To this end we have joined Sedex (the
Supplier Ethical data Exchange),
an organisation dedicated to driving
improvements in responsible and
ethical business practices in global
supply chains. in fy2013, we are
planning to formally audit key suppliers
against our procurement standards.
we seek to support our suppliers
through entering into long term
supply arrangements with our
suppliers of apples, barley and
malt, our key raw materials.
GrEEn proDuCTIon
in fy2012, we milled a record number
of apples – 45,000 tonnes from our
orchards and from the orchards of
our suppliers in ROi for Clonmel and
36,000 in the Uk for Shepton. we are
also encouraging apple growers to plant
early harvesting varieties to increase the
availability of apples in the off season.
we encourage sustainable agricultural
practices and the preservation of
biodiversity. we are actively involved
in the National Association of Cider
makers (NACm) which takes the lead
in adopting and working to sustainable
principles both in the physical and
social environment, and carries out
annual climate change assessments.
we have continued the Green Apple
Awards, a biennial competition open
to all contracted growers who supply
apples to the cider mill at Shepton.
Growers are encouraged to practise
integrated Pest management, which
involves the use of carefully timed sprays
to minimise usage and the impact on
beneficial insects. we continue to work
closely with the farming and wildlife
Group at Somerset County Council.
CoMMunITY EnGaGEMEnT
Dialogue with customers
Understanding the views of our
stakeholders is an important part of
our business. we take feedback from
our customers very seriously, and
our divisional managing directors
are partially targeted on the basis of
their customer satisfaction results.
in the Uk, our customers’ organisations
are surveyed by Advantage Group,
an independent provider of business
relationship benchmarking, covering all
areas of our interactions with customers
from supply chain to marketing support. in
ROi, similar “voice of Customer” surveys
of our on-trade and off-trade customers
are carried out by behaviour and Attitudes,
an independent research agency.
roI
in ROi, our bulmers brand made the
community an essential part of its
marketing campaign during fy2012. The
‘doing Our bit’ campaign was centred
on the desire to engage consumers
and our brand in the common goal
of helping the community. As part
of the ‘doing Our bit’ campaign we
ran a Golden Apple promotion where
winners received €2,500 for themselves
and €2,500 for a community cause
of their choice. we also engaged in
many local community activities.
northern Ireland
Tennent’s vital is Northern ireland’s
biggest music festival and in 2011.
Through ‘Tennent’s UnTapped’,
two unsigned acts were offered the
chance to showcase their music
by playing onstage at the event.
Scotland
Tennent’s is a founding partner of T in
the Park, one of the top music festivals
in Europe, which helps bring some of the
world’s biggest music stars to Scotland.
Since 1996, Tennent’s T break has enabled
the most fresh and exciting unsigned
talent in Scotland to showcase their
music on the T break Stage at T in the
Park. The T break team also offers one
student a six-month music internship.
Tennent’s sponsorship of Celtic and
Rangers football clubs also has a strong
community element, with the “Could
have been A Player” programme
enabling some of our consumers to
live their footballing dream by playing
at the clubs’ stadiums. we donated
sponsorship rights to Celtic and Rangers
U19 and women’s teams to promote the
clubs’ respective Charity foundations.
The Tennent’s Training Academy, a £1
million centre of training excellence for the
pub and hospitality industry, was opened
at wellpark in 2010 and is helping increase
skills across the Scottish hospitality
industry. Over the last two years the
centre has trained over 5,000 academy
students across a range of courses.
As a result of our new investments in
2 7
CORPORATE RESPONSibiLiTy - CONTiNUEd
wellpark since 2009, 50 new jobs have
been created both at the bottling line
and in other areas of our business.
Scotland’s first minister has praised
the leadership role Tennent’s has played
in training and employment creation
across the Scottish hospitality sector.
we have also strengthened our links to
Scottish farmers, and all of our barley for
Caledonia best and Tennent’s Original
Export is sourced from Scottish farms.
we are donating 5p from every pint
of our new Caledonia best ale during
its first six months of sale to support
Scottish brewers and farmers.
England
Our Shepton cider mill is a large
employer in the west of England,
employing approximately 160 people
locally. we actively support local and
regional community initiatives to build
strong relationships with local people
and businesses, key stakeholders and
media in the west Country. in the past
year we have also supported the irish
and british beekeepers Associations.
Our various subsidiaries support
many charities in various ways.
rESponSIBlE DrInkInG
The portman Group
C&C is a member of The Portman Group,
the Uk industry body set up to ensure that
the marketing and promotion of alcohol
is consistent with responsible drinking.
The Portman Code of Practice seeks
to ensure that alcohol is promoted in a
socially responsible manner and only
to those over 18 years of age. The Code
applies to the naming, packaging and
promotional material and activity of all
pre-packaged alcoholic drinks which are
marketed for sale and consumption in
the Uk. we include in this all advertising,
the brand name, product descriptor,
packaging, print media, internet and other
new media, sponsorships, promotions
(on- and off-trade), labelling and point of
sale materials. during 2011, we assisted
with The Portman Group’s review of their
Code of Practice. An updated code will be
implemented over the next 12 months.
public Health responsibility Deal
in march 2011, the Group joined with
170 companies to sign up to the Uk
Coalition Government’s “Public health
Responsibility deal” with the aim of
working in partnership with Government
and other organisations to improve
public health through their influence
over food, alcohol, physical activity and
health in the workplace. This long-term
programme sees companies commit
and report on a series of pledges
aimed at tackling alcohol misuse.
bad” as examples of “best Practice” in
their review of the 2011 campaign. All of
our brands and our marketing activity
carry responsible drinking messages.
in march 2012, the Group joined with
the majority of the alcohol industry
to pledge a reduction in the period
between now and 2015 of one billion
units of alcohol consumed in the Uk
from the 52 billion currently anticipated
to be consumed in that period, with
30 million of that reduction coming
from the Group’s products. This will
be achieved by, amongst other things,
improving the choice available of
lower strength products and reducing
the strength of existing products.
Scottish Government alcohol
Industry partnership (SGaIp)
Tennent’s was a founding and remains
an active member of the SGAiP, which
was established in february 2007 with
the aim of reducing alcohol misuse in
Scotland. The SGAiP has undertaken
various initiatives over the last five years
towards achieving this objective, the
most recent of which was the review
and re-launch of the Scottish Alcohol
Sponsorship Guidelines in march 2012.
Minimum unit pricing
The Scottish Government has begun
legislating to introduce minimum pricing
for alcohol, and in the rest of the Uk
and ireland consultations on minimum
unit pricing are anticipated. in each
market we support these proposals as
long as they are fair, proportionate and
reasonably implemented, and are part
of an overall programme to reduce the
abuse of alcohol. during first minister
Alec Salmond’s visit to wellpark in
march 2012 he commended Tennent’s
for the exemplary corporate social
responsibility we have demonstrated
in Scotland through our support of
minimum pricing for alcohol.
responsible Drinking Initiatives
The Group has continued its commitment
to responsible drinking messages
throughout the last 12 months and we
are an active member of drinkaware.
in April and September 2011, Tennent’s
again donated advertising space
including the club magazines, match
programmes, LEd Perimeter boards,
Tv interview backdrops and players’ pre
match T-shirts to drinkaware’s “why
Let Good Times Go bad?” campaign.
drinkaware acknowledged Tennent’s
support in Scotland and Northern
ireland of its “why Let Good Times Go
‘T in the Park’, where Tennent’s is
the founding partner, leads the way,
working with government and others,
in communicating responsible drinking
messages. during the festival, Tennent’s
donated for free 50% of the contracted
advertising space on the large screens
by the two main stages and on the
outside back cover of the Official
Event Programme to drinkaware. in
addition, Tennent’s once again operated
‘be Chilled’ at ‘T in the Park’, which
comprises a facility for consumers
camping at the festival to pre-order
and collect chilled Tennent’s Lager to
encourage trading down; 4-packs were
the most popular pack size over the
weekend. The initiative was promoted
in advance of the weekend, with all
communications carrying responsible
drinking messages including emphasis
on eating (‘healthy T’) and alternating
drinking alcoholic drinks with water. T
in the Park provides free drinking water
across the festival site via standpipes.
roI
bulmers adheres to all of the alcohol
marketing, communications and
sponsorship codes of practice
in place in ROi.
bulmers is committed to promoting the
responsible serving, and consumption
of alcohol in ROi, and it is a member
of the Alcohol beverage federation of
ireland (Abfi) and the mature Enjoyment
of Alcohol in Society Limited (mEAS). we
adhere to the Abfi and mEAS voluntary
codes governing both the placement
and promotion of alcohol. All brand
communications carry the “Enjoy bulmers
Sensibly visit drinkaware.ie” taglines,
and bulmers contributes, financially
and through the provision of marketing
resources and expertise, to the production
of drinkaware.ie communications
and media planning in ireland.
Export markets
we are working with our distributors
to ensure that the marketing and sale
of our products in our export markets
complies with all relevant local laws
and regulations in this regard.
public policy leadership
The Group seeks to influence public
policy in areas relating to the beverage
industry through its active membership of
2 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
numerous trade bodies and associations.
we are a member (and currently vice-
chair) of the National Association of
Cider makers (NACm), and during the
next 12 months we hope to take over the
chair. The objectives of the NACm are,
amongst other things, the promotion
of the merits, qualities, heritage and
authenticity of cider and the cider-making
industry, engagement with taxation,
regulatory and opinion-forming bodies
having an interest in cider and/or alcohol
generally, and leading the broader alcohol
industry by example in sustainability,
community engagement and alcohol
responsibility. The NACm is also the first
drinks trade body to work with business
in the Community (biTC) to address
sustainability, and we have undertaken
the biTC’s “Responsible business
Checker”, which ran a comprehensive
analysis of our business operations.
in addition, we also look to influence public
policy through our active memberships of
various other trade and industry bodies.
EMploYEES
developing, engaging and rewarding
employees fairly is fundamental to the
success of our business and also to
the relationships that we have with the
local communities in which we work.
we are an equal opportunities employer.
we aim to create a working environment
in which all individuals are able to
make best use of their skills, free from
discrimination or harassment, and in
which all decisions are based on merit.
we have a formal equal opportunities
policy that commits us to promoting
equality of opportunity for all our staff
and job applicants. for our operations
in Northern ireland this includes
adherence to the macbride Principles.
Our policy states that we do not
discriminate on the basis of age, disability,
marital status, ethnicity, creed, sex
or sexual orientation. The policy also
requires our staff to treat customers,
suppliers and the wider community in
accordance with these principles as well.
Training and development
This year we launched a performance
and people review process which
facilitates structured discussions
between all employees and their line
managers and covers their objectives,
performance, potential and development.
Employee engagement
we take employee engagement
seriously. A confidential employee
survey is undertaken annually by an
external facilitator. Topics covered
include communication, supervision
and management, career development,
work-life balance, working conditions and
engagement. The results are reported to
the board and to senior management. The
reasons for any areas of low engagement
are analysed and action is taken to address
matters of concern. This year 89% of our
employees participated in the survey.
A range of levels of engagement was
found around the Group, to a large extent
reflecting the relative business success,
investment and level of organisational
change experienced by each business unit.
Health & Wellbeing of employees
Last year, we held for the first
time a health & Safety day at each
manufacturing site. This was a day on
which no manufacturing took place and
during which all employees participated
in various safety workshops and training
programmes. This will be an annual event
to positively reinforce our commitment to
reducing workplace risk and improving
safety culture. we measured the
success of these days as part of the
employee survey referred to above.
Last year, we reduced our total accident
rate by over 21%. ‘Total accidents’ includes
non-lost time, lost time and reportable
accidents. Some other measures we
have been taken to improve health and
Safety performance in fy2012 include:
• An ShE (Safety, health & Environmental)
manager appointed to coordinate all
ShE activities across the entire group
as well as having an ShE manager in
each manufacturing site and an ShE
champion for each commercial office.
• A group operations committee reviews
monthly manufacturing ShE kPis.
• health & safety is now included
in the performance evaluations
of all operations employees.
• Six-monthly health and Safety Reports
are reviewed by C&C’s main board.
• A new group policy for the safe
evacuation of restricted mobility
persons from our offices.
2 9
bOARd Of diRECTORS
SIr BrIan STEWarT*
Chairman
brian Stewart (67) was appointed as a non-executive
STEpHEn GlanCEY
Group Chief Executive officer
Stephen Glancey (51) was appointed Group Chief
kEnnY nEISon
Group Chief Financial officer
kenny Neison (42) was appointed Chief financial
director of the Group and as a member of the
Executive Officer in 2012. Prior to that, he was
Officer in 2012. he joined the Group in November
Nomination Committee in march 2010. he was
appointed Chief Operating Officer in November 2008
2008 and was appointed to the board as Group
appointed as Chairman of the Group in August 2010.
and Group finance director in may 2009. A chartered
Strategy director and head of investor Relations
he is a former Chairman of Standard Life plc and of
accountant, he is a former group operations director
in November 2009. A chartered accountant, he
miller Group plc and a former chairman and former
of Scottish & Newcastle plc.
previously held a number of senior financial positions
chief executive of Scottish & Newcastle plc.
in Scottish & Newcastle plc, including Uk finance
director and finance director for western Europe.
joHn BurGESS*
John burgess (61) became a non-executive director of
STEWarT GIllIlanD*
Stewart Gilliland (55) was appointed as a non-executive
the Group holding company in January 1999, following
director of the Company and a member of the
the leveraged buy-out of the Group by funds advised
Remuneration Committee in April 2012. from 2006
by bC Partners, and was appointed a non-executive
to 2010 he was Chief Executive Officer of müller dairy
director of the Company on its flotation in April 2004.
(Uk) Ltd. Prior to that, he held positions at whitbread
he was appointed a member of the Nomination
beer Company and at interbrew SA in markets
Committee in february 2007. he joined bC Partners
including the Uk and ireland, Europe and Canada. he
in 1986 as one of the founding partners and was a
is currently a non-executive director of booker Group
partner there until his retirement in 2006. he has over
plc, vianet Group PLC and Sutton & East Surrey water
20 years’ experience in the private equity sector.
Plc. he is also a non-executive on the board of the Uk
joHn HoGan*
John hogan (71) was appointed as a non-executive
director of the Company and a member of the Audit
Committee in April 2004. he was the managing
partner of Ernst & young in ireland between 1994
and 2000 and was a member of its global board. he
is currently a non-executive director of Prudential
international Assurance plc, and other private
companies. John hogan has over 40 years of financial
experience. The board has determined that John
hogan is the financial expert on the Audit Committee.
department for Communities and Local Government.
he brings significant experience of the long alcohol
drinks sector in international markets.
BoarD CoMMITTEES
audit Committee**
nomination Committee
remuneration Committee
Senior Independent Director
John hogan (Chairman)
Sir brian Stewart (Chairman) Philip Lynch (Chairman)
Richard holroyd
Richard holroyd
Tony Smurfit
John burgess
Philip Lynch
breege O’donoghue
Stewart Gilliland
Richard holroyd
3 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
rICHarD HolroYD*
Richard holroyd (65) was appointed as a non-
pHIlIp lYnCH*
Philip Lynch (66) was appointed as a non-executive
executive director of the Company and a member
director of the Company and a member of the
of the Audit Committee and the Nomination
Nomination Committee and the Remuneration
Committee in April 2004. he was previously the
Committee in April 2004. Philip is a non-executive
managing director of Colman’s of Norwich and
director of fbd holdings plc; and Openhydro Group
head of the global marketing futures department
Limited. Philip Lynch brings many years’ experience
of Shell international. he has served as non-
of public companies in ireland.
executive director of several companies in the Uk
and continental Europe and was a member of the
Uk Competition Commission from September 2001
to April 2010. Richard holroyd has many years’
experience in the fast moving consumer goods sector.
Company Secretary and General Counsel
BrEEGE o’DonoGHuE*
breege O’donoghue (67) was appointed as a non-
TonY SMurFIT*
Tony Smurfit (48) was appointed as a non-executive
paul WalkEr
Paul walker joined the Group in 2010 as General
executive director of the Company and a member of
director of the Company and a member of the Audit
Counsel and was appointed Company Secretary in
the Nomination Committee in April 2004. She is an
Committee in April 2012. Tony Smurfit has been
2011. Prior to that, he was a partner in Lawrence
executive director of Penneys/Primark. She is Chair of
President and Chief Operations Officer of Smurfit
Graham LLP, a London law firm. he previously
the Labour Relations Commission, a member of the
kappa Group since 2002. he previously held the role
worked in investment banking.
Outside Appointments board of the Code of Standards
of Chief Executive of Smurfit france and then Smurfit
and behaviour for the Civil Service, a trustee of
Europe and has worked in a number of divisions
ibEC, and was previously a director of An Post and
in SkG both in Europe and the United States. he
Aer Rianta. breege O’donoghue has many years
has long-standing experience in global markets,
experience in the irish and international retail sector.
managing an extensive portfolio of international
operations serving a world-wide customer base.
for information on independence of the directors, please see directors’ Statement of Corporate Governance
* Non-Executive director
** The Audit Committee has determined that John hogan is the Audit Committee financial expert.
3 1
DIRECTORS’ REPORT
The Directors present the annual report and audited consolidated financial statements of the Group for the year ended
29 February 2012.
PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The Group’s principal trading activity is the production, marketing and selling of cider and beer.
During the year, the Group acquired Hornsby’s, the number two domestic US cider brand, from E & J Gallo Winery. The Group
also disposed of its Northern Ireland wholesaling business (Quinns of Cookstown) to Britvic Northern Ireland. There has been no
other material change in the nature of the business of the Group.
The information to be included with respect to the review of the business and future developments as required by section 13 of
the Companies (Amendment) Act 1986 is contained in the Operations Review on pages 10 to 17.
RESULTS
For the year ended 29 February 2012, the Group reported Revenue of €716.7 million (FY2011: €770.0 million) and Net Revenue of
€480.8 million (FY2011: €509.9 million).
Operating profit before exceptional items amounted to €111.2m (2011: €100.9m). This was in line with guidance given during the
year that operating profit would be in the range of €108m to €115m.
Profit for the year attributed to equity shareholders amounted to €95.7m (2011: €300.4m). On this basis, adjusted basic earnings
per share amounted to 29.4c (2011: 93.4c per share) and diluted earnings per share amounted to 28.7c (2011: 91.0c per share).
Earnings excluding exceptional items amounted to €92.2m (2011: €84.0m). On this basis, adjusted basic earnings per share
amounted to 28.3c (2011: 26.1c per share) and adjusted diluted earnings per share amounted to 27.6c (2011: 25.4c per share).
Earnings from continuing operations amounted to €97.5m (2011: €71.2m). Basic earnings per share from continuing operations
amounted to 30.0c (2011: 22.1c per share) and diluted earnings per share from continuing operations amounted to 29.2c (2011:
21.6c per share).
The financial statements for the year ended 29 February 2012 are set out on pages 59 to 119.
DIVIDENDS
An interim dividend of 3.67 cent per share for the year ended 29 February 2012 was paid in December 2011. Subject to approval
at the Annual General Meeting, it is proposed to pay a final ordinary dividend of 4.5 cent per share to shareholders who are
registered at close of business on 25 May 2012.
BOARD OF DIRECTORS
The following changes have occurred in the composition of the Board since 18 May 2011, the date of the last Directors’ Report. Mr
John Dunsmore resigned as Group Chief Executive Officer on 31 December 2011 and resigned as a Director on 29 February 2012.
Mr Stephen Glancey was appointed Group Chief Executive Officer on 1 January 2012. Mr Kenny Neison was appointed Group Chief
Financial Officer on 1 January 2012. Mr Liam FitzGerald resigned as a Director on 29 February 2012. Mr Tony Smurfit and
Mr Stewart Gilliland were appointed as Directors on 17 April 2012.
The names, functions and date of appointment of the current Directors are as follows:
Director
Sir Brian Stewart
Stephen Glancey
Kenny Neison
John Burgess
Stewart Gilliland
John Hogan
Richard Holroyd
Philip Lynch
Breege O’Donoghue
Tony Smurfit
Function
Chairman
Group Chief Executive Officer
Group Chief Financial Officer
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Short biographical notes on each Director are given on pages 30 and 31.
Appointment
2010
2008
2009
2004
2012
2004
2004
2004
2004
2012
In line with the provisions of the UK Corporate Governance Code, C&C Group is adopting a policy of annual re-election for all
Board Directors. Consequently, all Directors will offer themselves for re-election at the Company’s Annual General Meeting to be
held on 27 June 2012.
3 2
C & C G R O U P P L C
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
INTERESTS OF DIRECTORS AND COMPANy SECRETARy
Information in relation to the beneficial and non-beneficial interests in the share capital of Group companies held by the Directors
and Company Secretary who held office at 29 February 2012 is contained within the Report of the Remuneration Committee on
Directors’ Remuneration on pages 47 to 55.
RESEARCH AND DEVELOPMENT
Certain Group undertakings are engaged in ongoing research and development aimed at improving processes and expanding
product ranges.
PRINCIPAL RISKS AND UNCERTAINTIES
Under Irish company law (Statutory Instrument 116/2005 European Communities (International Financial Reporting Standards
and Miscellaneous Amendments) Regulations 2005), the Group and the Company are required to give a description of the
principal risks and uncertainties which they face.
The principal risks and uncertainties faced by the Group’s businesses are set out below. The Group considers that currently
the most significant risks to its results and operations over the short term are (a) strategic failures, (b) the continued switch in
consumer purchasing from the on-trade to the off-trade, (c) concerns arising out of the eurozone crisis and (d) failing to attract
and retain high-performing employees.
Risks and uncertainties relating to strategic goals
• The Group’s strategy is to focus upon earnings growth through organic growth, acquisitions and joint ventures and entry into
new markets. These opportunities may not materialise or deliver the benefits or synergies expected and may present new
social and compliance risks. The Group seeks to mitigate these risks through due diligence and careful investment.
Risks and uncertainties relating to revenue and profits
• The majority of the Group’s revenue derives from Ireland and the UK, where growth opportunities are limited. The Group seeks
to maintain the relevance of its products in these markets through brand investment.
• Economic conditions in the Group’s principal markets may affect consumer spending and confidence. The Group seeks to mitigate
these risks through careful forecasting and regular monitoring of market conditions and by maximising operating efficiency.
• The number of on-trade premises in Ireland and the UK is in decline and consumers are switching to the off-trade. Customers,
particularly in the on-trade where the Group has exposure through cash advances to customers, may experience financial
difficulties. The Group monitors the level of its exposure carefully.
• The Group’s customers may increase their negotiating strength through gains in market share or consolidation. The Group
seeks to offset this risk by developing new markets and customers for its products and through product innovation.
• Consumer preference may change, new competing brands may be launched and competitors may increase their marketing or
change their pricing policies. The Group has a programme of brand investment and innovation to maintain and enhance the
market position of its products.
• Seasonal fluctuations in demand, especially an unseasonably bad summer in Ireland or the UK, could materially affect demand
for the Group’s cider products.
Risks and uncertainties relating to costs and production
• Input costs may be subject to volatility and inflation and the continuity of supply of raw materials may be affected by the weather
and other factors. The Group seeks to mitigate some of these risks through long term or fixed price supply agreements. The
Group does not seek to hedge its exposure to commodity prices by entering into derivative financial instruments.
• Circumstances such as the loss of a production or storage facility or disruptions to its supply chains or critical IT systems
may interrupt the supply of the Group’s products. The Group seeks to mitigate the operational impact of such an event by the
availability of multiple production facilities, fire safety standards and disaster recovery protocols, and the financial impact of
such an event through business interruption and other insurances.
Financial risks and uncertainties
• There is continued concern surrounding the euro currency and the implications of Ireland’s continued participation. The Group’s
operations involve the sale and purchase of goods denominated in currencies other than the euro, principally pounds sterling
and the US dollar. Fluctuations in value between the euro and these currencies may affect the Group’s revenues and costs. The
Group seeks to mitigate currency and interest rate risks through hedging and structured financial contracts to hedge a portion
of its foreign currency transaction exposure and to fix a portion of its variable rate interest exposure.
• The Group’s shares have a primary listing on the Irish Stock Exchange and are denominated in euro and the continued
economic crisis may affect liquidity. The Group keeps its listings under review.
• The solvency of the Group’s defined benefit pension schemes may be affected by a fall in the value of their investments, market
and interest rate volatility and other economic and demographic factors. Each of these factors may require the Group to
increase its contribution levels. The trustees of the pension schemes have recently obtained clearance from the Pensions Board
pursuant to s50 of the Pensions Act 1990 to reduce contractual benefits in the schemes.
3 3
DIRECTORS’ REPORT - CONTINUED
Fiscal, regulatory and liability-related risks and uncertainties
• The Group may be adversely affected by changes in excise duty or taxation on cider and beer in Ireland, the UK and other
territories. An upward movement in the Irish corporation tax rate and /or changes in Irish corporate tax legislation could have a
material impact on the Group’s profits.
• The Group may be adversely affected by changes in government regulations affecting alcohol pricing, sponsorship or
advertising. Within the context of supporting responsible drinking initiatives, the Group supports the work of its trade
associations to present the industry’s case to government.
• The Group’s operations are subject to extensive regulation, including stringent environmental, health and safety and food
safety laws and regulations and competition law. Failure to comply with all legislation could lead to prosecutions and damage
to the reputation of the Group and its brands. The Group has in place a permanent legal and compliance monitoring function
addressing these issues and it provides training to its employees.
• The Group is vulnerable to contamination of its products or base raw materials, whether accidental, natural or malicious.
Contamination could result in a recall of the Group’s products, damage to brand image and civil or criminal liability. The Group
has established protocols and procedures for incident management and product recall and mitigates the financial impact by
appropriate insurance cover.
• Fraud, corruption and theft against the Group whether by employees, business partners or third parties is a risk, particularly as the
Group develops internationally. The Group maintains appropriate internal controls and procedures to guard against economic crime.
Employment-related risks and uncertainties
• The Group’s continued success is dependent on the skills and experience of its executive Directors and other high-performing
personnel and could be affected by their loss or the inability to recruit or retain them. The Group seeks to adequately reward,
motivate and retain its senior personnel through appropriate remuneration policies.
• Whilst relations with employees are generally good, work stoppages or other industrial action could have a material adverse
effect on the Group. The Group seeks to ensure good employee relations through engagement and dialogue.
FINANCIAL RISK MANAGEMENT
As required by Irish company law (Statutory Instrument 765.2004), the financial risk management objectives and policies of the
Company and the Group, including hedging activities and the exposure of the Company and the Group to financial risk, are set out
in the Group Chief Financial Officer’s Review on pages 22 to 23 and note 23 to the financial statements on pages 106 to 114.
ACCOUNTING RECORDS
The measures taken by the Directors to secure compliance with the requirements of Section 202 of the Companies Act, 1990 with
regard to the keeping of proper books of account are to employ accounting personnel with appropriate expertise and to provide
adequate resources to the finance function. The books of account of the Company are maintained at Group offices in Annerville,
Clonmel, Co. Tipperary.
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.
CORPORATE GOVERNANCE
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 Directors’ Statement on Corporate Governance on pages 37 to 46.
DIRECTORS’ REMUNERATION
The Report of the Remuneration Committee on Directors’ Remuneration is set out on pages 47 to 55. The Board will present this
report to shareholders at the Annual General Meeting for the purposes of a non-binding advisory vote.
SUBSTANTIAL HOLDINGS
As at 16 May 2012, the following shareholders have notified the Company as to their interest in 3% or more of the share capital of
the Company.
Shareholder
Invesco Limited
Independent Franchise Partners, LLP
Oppenheimer Funds, Inc. and OFI Institutional Asset Management, Inc.
Southeastern Asset Management, Inc.
Investec Asset Management Limited
Franklin Templeton Institutional, LLC
F&C Asset Management plc
Deutsche Bank AG
3 4
C & C G R O U P P L C
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
%
8.98
7.03
5.88
5.36
4.05
4.04
3.99
3.21
As far as the Company is aware, other than as stated above, no other person or company has an interest in 3% or more of the
share capital of the Company.
SHARE PRICE
The price of the Company’s ordinary shares as quoted on the Irish Stock Exchange at the close of business on 29 February 2012
was €3.665 (2011: €3.535). The price of the Company’s ordinary shares ranged between €2.70 and €3.69 during the year.
AUDITOR
In accordance with Section 160(2) of the Companies Act, 1963, the auditor, KPMG, Chartered Accountants, Statutory Audit Firm,
will continue in office.
ISSUE OF SHARES AND PURCHASE OF OWN SHARES
At the Annual General Meeting held on 29 June 2011, the Directors received a general authority to allot shares. 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 27 June 2012 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, a resolution will also be proposed
to allow the Directors 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. If granted, these authorities will expire at the conclusion of next year’s Annual General Meeting or 27
September 2013, whichever is the 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 29 June 2011 authority was granted to purchase up to 10% of the Company’s Ordinary
Shares. No shares were purchased by the Company in the year under review.
Special resolutions will be proposed at the Annual General Meeting to be held on 27 June 2012 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 2013 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.
Options to subscribe for a total of 6,744,300 Ordinary Shares are outstanding, representing 1.99% of the issued ordinary share capital. If
the authority to purchase Ordinary Shares were used in full, the options would represent 2.21% of the issued ordinary share capital.
At 16 May 2012 the Company has an issued share capital of 339,274,722 ordinary shares of €0.01 each and an authorised share
capital of 800,000,000 ordinary shares of €0.01 each.
Under the terms of the C&C Joint Share Ownership Plan (further information on which is contained in the Report of the
Remuneration Committee on Directors’ Remuneration on pages 47 to 55) the Company issued 16,000,000 ordinary shares which
are held jointly by an Employee Benefit Trust and the individual executives (save for certain holdings which have been sold or been
transferred to the Employee Benefit Trust solely or to participants solely), and the shares currently so held are accounted for as
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.
TAKEOVER BIDS DIRECTIVE (STATUTORy INSTRUMENT 255.2006 EUROPEAN COMMUNITIES (TAKEOVER BIDS (DIRECTIVE
2004/25/EC)) REGULATIONS 2006)
Details of the Company’s capital structure can be found in note 24 to the financial statements on pages 114 to 116. Details of the
rights attaching to shares, and the deadlines for exercising voting rights, are set out in the Report on Corporate Governance on pages
37 to 46, as is a description of the powers of the Board of Directors. There are no restrictions on the transfer of any class of shares,
subject to restrictions that may be imposed by the Board under the Articles in limited circumstances, and no limitations on the holding
of any class of shares. There are no known arrangements between shareholders restricting transfers of shares or relating to voting
rights. Details of Employee Share Schemes, and the rights attaching to shares held in these schemes, can be found in note 4 to the
Financial Statements on pages 81 to 85 and the Report of the Remuneration Committee on Directors’ Remuneration on pages 47 to 55.
Details of the rights attaching to shares issued under the Joint Share Ownership Plan are set out in the Report of the Remuneration
Committee on Directors’ Remuneration on pages 47 to 55. Details of the powers of directors to issue and buy back shares are set out
in the previous paragraph. Details of agreements to which the Company is party to, and which contain change of control provisions,
are contained in note 19 on page 100. Change of control provisions relating to the Executive Share Option Scheme and the Joint Share
Ownership Plan are set out in the Report of the Remuneration Committee on Directors’ Remuneration on pages 47 to 55. All of the
above details are deemed to be incorporated into this part of the Director’s Report.
3 5
DIRECTORS’ REPORT - CONTINUED
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.
Signed
On behalf of the Board
Sir Brian Stewart
Chairman
16 May 2012
Stephen Glancey
Group Chief Executive Officer
3 6
C & C G R O U P P L C
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE
C&C is incorporated in Ireland and is subject to Irish company law. It has a primary listing on the Irish Stock Exchange (‘ISE’).
The Directors are committed to maintaining the highest standards of corporate governance. The Listing Rules of the ISE require
every company listed on the Main Securities Market of the ISE to state in its annual report how the principles of the UK Corporate
Governance Code published in June 2010 by the Financial Reporting Council (the ‘UK Code’) have been applied and whether
the company has complied with all relevant provisions of the UK Code and the Irish Corporate Governance Annex (the ‘Irish
Annex’), which implements additional requirements for companies (such as C&C Group) with a primary equity listing on the Main
Securities Market of the ISE. Where companies diverge from the provisions of the UK Code or the Irish Annex, the ISE expects
them to include explanations that provide a rationale for the divergence. The text of the UK Code and the Irish Annex can be found
on the ISE’s website: www.ise.ie.
This Corporate Governance statement describes how the Group applied the principles of the UK Code and the Irish Annex
throughout the financial year ended 29 February 2012.
BOARD OF DIRECTORS
Role
The Board is responsible for the oversight, leadership and control of the Group and its long-term success. There is a formal
schedule of matters reserved to the Board for decision. This includes approval of Group strategic plans, annual budgets,
financial statements, significant capital expenditure items, major acquisitions and disposals, changes to capital structure, Board
appointments, and the review of the Group’s corporate governance arrangements and system of internal control. The Board is
also responsible for instilling the appropriate culture, values and behaviour throughout the Group.
The roles of the Chairman and the Group Chief Executive Officer are separate with a clear division of responsibility between them,
which is set out in writing and which has been approved by the Board. The Board delegates responsibility for the management
of the Group through the Group Chief Executive Officer to executive management. The Board also delegates some of its
responsibilities to Board Committees, details of which are set out below. The responsibilities of the Chairman are covered in
detail on page 38.
The Group Chief Executive Officer has full day-to-day operational and profit responsibility for the Group and is accountable to the
Board for all authority delegated to executive management. His overall brief is to execute agreed strategy, to co-ordinate and
maintain the continued profitability of the Group and to oversee senior management responsible for the day-to-day running of the
business.
Non-executive Directors are expected to constructively challenge management proposals and to examine and review
management performance in meeting agreed objectives and targets. In addition, they are expected to draw on their experience
and knowledge in respect of any challenges facing the Group and in relation to the development of proposals on strategy.
Individual Directors may seek independent professional advice at the Company’s expense, where they judge it necessary to
discharge their responsibilities as Directors. No such professional advice was sought by any Director during the year.
The Group has a policy in place which indemnifies the Directors in respect of certain legal actions taken against them.
Board Composition, Membership and Renewal
The Board considers that, between them, the Directors bring a range of skills, knowledge and experience necessary to provide
leadership, control and oversight of the Group and discharge their responsibility to all shareholders. The biographical details of
the continuing directors are set out on pages 30 and 31. The Board regards the number of non-executive Directors appointed to
the Board as sufficient to ensure satisfactory oversight of the Group’s management and that a Board size of ten Directors is not
unwieldy, but at the same time is sufficiently large to enable its Committees to operate without undue reliance on individual non-
executive Directors. As set out below the Board has an ongoing programme for Board refreshment and renewal, recognising the
need for independence and diversity, including gender diversity, on the Board. The Board is, through the Nomination Committee,
committed to achieving a greater level of gender diversity on the Board over time and recognises the importance and benefit of
gender diversity throughout the Group.
At 29 February 2012, the Board comprised of ten Directors, of whom three were executive and seven non-executive Directors (including
the Chairman). On 29 February 2012 John Dunsmore and Liam FitzGerald retired as Directors. Consistent with a commitment to Board
refreshment and renewal, Stewart Gilliland and Tony Smurfit were appointed to the Board as non-executive Directors on 17 April, 2012.
Consequently, as at the date of this report, the Board is comprised of ten Directors, two of whom are executive and eight of whom are
non-executive Directors.
3 7
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE - CONTINUED
Board Independence
In line with the UK Code, it is Board policy that at least half the Board, excluding the Chairman, shall consist of independent
non-executive Directors. The Board reviewed the composition of the Board and determined that John Burgess, Liam
FitzGerald (resigned 29 February 2012), John Hogan, Richard Holroyd, Philip Lynch and Breege O’Donoghue were independent.
Consequently, as at 29 February 2012, excluding the Chairman, 66% of the C&C Group Board comprised of independent,
non-executive Directors. The Board has further determined that the non-executive Directors appointed in April 2012 are also
independent. As of the date of this report, excluding the Chairman, 78% of the Board comprised of independent, non-executive
Directors. In reaching that determination, the Board considered the principles relating to independence contained in the UK Code,
together with the guidance provided by a number of shareholder voting agencies.
The independence of Board members is considered annually. In determining the independence of non-executive Directors, the
Board considered the principles relating to independence contained in the UK Code and the guidance provided by a number
of shareholder voting agencies. Those principles and guidance address a number of factors that might appear to affect the
independence of Directors, including former service as an executive of the Group, extended service to the Board and cross-
directorships. However, they also make clear that a Director may be considered independent notwithstanding the presence of one
or more of these factors. This reflects the Board’s view that independence is determined by a Director’s character and judgement.
The Board considers that each of the non-executive Directors brings independent judgement to bear. In the case of John
Burgess, the Board considered his length of service but was satisfied that his independence is not compromised. As part of this
assessment, the Board considered that while John Burgess has served on the Board of the Company or its predecessors since
1999, he has not served for more than 9 years concurrently with the same executive Directors. In the case of Sir Brian Stewart,
the Board was satisfied that he was independent on his appointment as referred to below.
Chairman
Sir Brian Stewart has been Chairman of the Group since August 2010. The Chairman is responsible for the efficient and effective
working of the Board. He is responsible for ensuring that the Board considers the key strategic issues facing the Group and that
the Directors receive accurate, timely, relevant and clear information. He also ensures that there is effective communication with
shareholders and that the Board is apprised of the views of the Group’s shareholders. While the Board has determined that Sir Brian
Stewart was independent on appointment to the Board, it recognises that previous working relationships with the Group’s senior
executives is a consideration in determining independence as set out by the UK Code and by some shareholder voting agencies.
Consequently, while the Board was satisfied as to Sir Brian’s independence, he stepped down from his position as a member of
the Remuneration Committee on his appointment as Chairman. During the period under review there was no change in the other
significant commitments of the Chairman.
Senior Independent Director
Richard Holroyd was appointed Senior Independent Director in July 2007. He is available to shareholders who have concerns for
which contact through the normal channels of Chairman, Group Chief Executive Officer or Group Chief Financial Officer, has failed to
resolve or for which such contact is inappropriate. He is also available to meet major shareholders on request.
Audit Committee Financial Expert
The Audit Committee has determined that John Hogan, who also chairs the Committee, is the Audit Committee financial expert. He
is a qualified chartered accountant and was the managing partner of Ernst & Young in Ireland between 1994 and 2000. He was also a
member of the Ernst & Young global board.
Company Secretary
All Directors have access to the Company Secretary, who is responsible to the Board for ensuring that Board procedures are
complied with. The Company Secretary is Paul Walker who succeeded Sinead Gillen on 29 June 2011. The appointment and removal
of the Company Secretary is a matter for the Board.
Appointment, Retirement and Re-election
The non-executive Directors are engaged under the terms of a letter of appointment, details of which are set out in the Report of
the Remuneration Committee on Directors’ Remuneration. Copies of the letters of appointment are available on request from the
Company Secretary.
The Company’s Articles of Association require that at least one-third of the Directors subject to rotation shall retire by rotation
at the Annual General Meeting in every year. Directors appointed by the Board must also submit themselves for election at the
first annual general meeting following their appointment. However, in accordance with the recommendations of the UK Code,
the Directors have resolved that they will all retire and submit themselves for election or re-election by the shareholders at the
Annual General Meeting this year.
3 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Induction and Development
A comprehensive tailored induction programme is arranged for each new Director. The aim of the programme is to provide the
Director with a detailed insight into the Group. The programme involves meeting with the Chairman, Group Chief Executive Officer,
Group Chief Financial Officer, Company Secretary and key senior executives. It covers areas such as strategy and development,
organisation structure, succession planning, financing, corporate responsibility and compliance, investor relations and risk
management. The Board receives regular updates from the external legal and other advisers in relation to regulatory and accounting
developments. Throughout the year, Directors meet with key executives and meet with local management teams, and a site visit for
all Board Directors, to one of the Group’s production facilities, is usually scheduled annually.
Newly-appointed members of the Audit Committee will meet with the key members of the external audit, internal audit and finance
teams. New members of the Remuneration Committee will meet with the Committee’s remuneration consultants in the year of their
appointment to the Committee.
External non-executive directorships
The Board believes that there may be benefit if executive Directors accept a non-executive directorship with other companies to
broaden their skills, knowledge and experience. The Remuneration Committee determines whether Directors should be permitted
to retain any fees paid in respect of such appointments.
Meetings
It is Board policy to meet not less than nine times a year. The Board will also meet at other times as it considers appropriate. The Board
usually makes at least one visit a year to one of the operating subsidiaries. During the period under review there were nine scheduled
meetings of the Board. Details of Directors’ attendance at these scheduled meetings are set out in the table on page 46. Further
meetings took place throughout the year. In addition, a meeting of members of the Board was held without the executive Directors
present to provide an opportunity for non-executive Directors and the Chairman to assess their performance, and a further meeting
of the non-executive Directors led by the Senior Independent Director was held without the Chairman being present to assess the
Chairman’s performance.
The Chairman sets the agenda for each meeting in consultation with the Group Chief Executive Officer and the Company
Secretary. The agenda and Board papers, which provide the Directors with relevant information to enable them to fully consider
the agenda items in advance, are circulated prior to each meeting. Directors are encouraged to participate in debate and
constructive challenge. While Directors are expected to attend all scheduled meetings, in the event a Director is unable to
attend a meeting, their view on all agenda items is sought and conveyed to the Chairman in advance of the meeting. In addition,
following the meeting, matters discussed and decisions made at the meeting are conveyed to the Director.
Performance evaluation
The Board recognises the importance of a formal and rigorous evaluation of the performance of the Board and its Committees.
The Chairman conducts an annual review of corporate governance and the operation and performance of the Board and
its Committees. In the year under review the Chairman has completed a detailed review of the operation of the Board, the
performance of individual Directors and, within the remit of the Nomination Committee, succession planning, identifying in this
process the experience and qualities required by the Group for the future implementation of its strategy.
The Chairman conducts one to one discussions each year with each Director to assess his or her individual performance.
Performance is assessed against a number of criteria, including his or her contribution to Board and Committee meetings; time
commitments; contribution to strategic developments; and relationships with other Directors and management.
The Senior Independent Director and the other non-executive Directors review the Chairman’s performance and the Board’s
performance each year, the results being reported back to the Chairman with recommendations for improvement.
The Board also recognises the need for periodic external evaluation and the UK Code’s new recommendation that such reviews
be externally facilitated at least every three years. The Group intends to establish a formal policy and process for external
evaluation during the course of FY2013.
3 9
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE - CONTINUED
Remuneration
Details of remuneration paid to Directors (executive and non-executive) are set out in the Report of the Remuneration Committee
on Directors’ Remuneration on pages 47 to 55.
Non-executive Directors are remunerated by way of a Director’s fee. Additional fees are also payable to the Chairman of the Audit
Committee, Chairman of the Remuneration Committee and to the Senior Independent Director. Non-executive Directors fees and
additional fees payable to Committee Chairman and the Senior Independent Director have not been increased since 2008.
It is Board policy that non-executive Director remuneration does not comprise any performance related element and, therefore,
non-executive Directors are not eligible to participate in the Group’s bonus schemes, option plans or share award schemes.
Non-executive Directors’ fees are not pensionable and non-executive Directors are not eligible to join any Group pension plans.
Executive Directors’ remuneration is inclusive of any Director’s fee.
The report of the Remuneration Committee on Directors’ Remuneration will be presented to shareholders for the purposes of a non-
binding advisory vote at the Annual General Meeting on 27 June 2012. While there is no legal obligation for the Group to put such a
resolution to a vote of shareholders at the Annual General Meeting, the Board believes that such a resolution is good practice.
Share ownership and dealing
Details of Directors’ shareholdings are set out on page 54.
The Group has a policy on dealing in shares that applies to all Directors and senior management. This policy adopts the terms
of the Model Code as set out in the Listing Rules published by the UK Listing Authority and the Irish Stock Exchange. Under this
policy, Directors are required to obtain clearance from the Chairman (or in the case of the Chairman himself, from the Senior
Independent Director) before dealing. Directors and senior management are prohibited from dealing in the Company’s shares
during designated close periods and at any other time when the individual is in possession of Inside Information (as defined by
the Market Abuse (Directive 2003/6/EC) Regulations 2005).
COMMITTEES
The Board has established three permanent committees to assist in the execution of its responsibilities. These are the Audit
Committee, the Nomination Committee and the Remuneration Committee. The current membership of each committee is set out
on page 30. Attendance at meetings held is set out in the table on page 46. Ad-hoc committees are formed from time to time to
deal with specific matters.
Each of the permanent Board Committees has terms of reference under which authority is delegated to them by the Board. These
terms of reference are available on the Company’s website www.candcgroupplc.com. Minutes of all Committee meetings are
circulated to the entire Board.
The Chairman of each committee attends the Annual General Meeting and is available to answer questions from shareholders.
Audit Committee
The Audit Committee comprises only independent, non-executive Directors. The members during the year were John Hogan
(Chairman), Liam FitzGerald and Richard Holroyd. Mr FitzGerald ceased to be a member of the committee upon his resignation
as a Director on 29 February 2012. Tony Smurfit joined the Committee on 17 April 2012.
As set out on page 38, the Audit Committee has determined that John Hogan, who also chairs the Committee, is the Audit
Committee financial expert.
It meets a minimum of four times a year. During the period under review it met eight times. Attendance at meetings held is set
out in the table on page 46.
The Group Chief Financial Officer attends Audit Committee meetings as appropriate, while the internal auditor and the external
auditor attend as required and have direct access to the Audit Committee Chairman. The Head of Finance is the secretary of the
Audit Committee.
4 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
The Audit Committee’s responsibilities include:
• monitoring the integrity, truth and fairness of the financial statements of the Group, including the annual report, interim report,
interim management statements, preliminary results and other formal announcements relating to the Group’s financial performance;
• reviewing the adequacy and effectiveness of the Group’s internal financial controls and risk management systems;
• reviewing the effectiveness of the Group’s internal audit function;
• reviewing the adequacy and security of the Group’s arrangements for its employees raising concerns, its procedures for
detecting fraud and the Group’s systems and controls for the prevention of bribery
• making recommendations to the Board in relation to the appointment and removal of the Group’s external auditor;
• evaluating the performance of the external auditor including their independence and objectivity;
• reviewing the annual internal and external audit plans and reviewing the effectiveness and findings of the external audit with
the external auditor;
• ensuring compliance with the Group’s policy on the provision of non-audit services by the external auditor.
The Audit Committee discharged its obligations during the year as follows:
• the Audit Committee reviewed the preliminary results announcement and the annual report and financial statements for
the year ended 28 February 2011 and reviewed the post-audit report from the external auditor identifying any accounting or
judgemental issues requiring its attention;
• the Audit Committee reviewed the Financial Report for the six months ended 31 August 2011 prior to its release in October 2011;
• the Audit Committee reviewed the Interim Management Statements issued in June 2011 and January 2012;
• the Audit Committee considered whether or not to recommend the re-appointment of the external auditor;
• the Audit Committee reviewed the external audit plan presented by the external auditor in advance of the audit for the year
ended 29 February 2012;
• the Audit Committee approved the annual internal audit plan and received and reviewed internal audit reports including the
annual assessment of internal control and other work described below;
• the Audit Committee received an external review of the pensions schemes;
• the Audit Committee adopted updated Terms of Reference in line with the recommendations of the UK Code.
The terms of reference of the Audit Committee require it to conduct an annual assessment of internal control. The risks facing
the Group are reviewed regularly by the Audit Committee with the executive management. Specific annual reviews of the risks
and fundamental controls of each business unit are undertaken on an ongoing basis, the results and recommendations of which
are reported to and analysed by the Audit Committee with a programme for action agreed by the business units.
Accordingly through the process outlined above, the Board confirms that it has conducted a review of the internal control systems
in operation.
The Group’s internal auditor reports to the Audit Committee and the Audit Committee has approved his terms of reference. He is
engaged on a programme of work, which includes, inter alia, maintaining the Group’s risk register, examining the fundamental
controls of the Group assessing anti-bribery and corruption risk and business continuity risk.
The Group has a policy in place governing the conduct of non-audit work by the external auditor. Under this policy the auditor is
prohibited from performing services where the auditor:
• may be required to audit his/her own work;
• would participate in activities that would normally be undertaken by management;
• is remunerated through a “success fee” structure;
• acts in an advocacy role for the Group.
Other than the above, the Group does not impose an automatic ban on the external auditor undertaking non-audit work. The
external auditor is permitted to provide non-audit services that are not, or are not perceived to be, in conflict with auditor
independence, provided it has the skill, competence and integrity to carry out the work and are considered by the Audit
Committee to be the most appropriate to undertake such work in the best interests of the Group. The engagement of the external
auditor in non-audit work must be pre-approved by the Audit Committee or entered into pursuant to pre-approved policies and
procedures established by the Audit Committee.
4 1
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE - CONTINUED
Details of the amounts paid to the external auditor during the year for audit and other services are set out in note 2 to the
financial statements on pages 80 and 81. The Audit Committee has adopted a policy that except in exceptional circumstances with
the prior approval of the Audit Committee non-audit fees paid to the Group’s Auditor should be capped at a maximum of 100% of
audit fees in any one year. During the year the Audit Committee gave approval to the auditor providing non-audit advisory services
principally in relation to tax.
Nomination Committee
The Nomination Committee is chaired by the Group Chairman and its constitution requires it to consist of a majority of
independent, non-executive Directors. The members during the year were Sir Brian Stewart (Chairman), John Burgess, Philip
Lynch and Breege O’Donoghue.
It meets a minimum of twice a year and met three times in the period under review. Attendance at meetings held is set out in the
table on page 46.
The Nomination Committee’s responsibilities include:
• reviewing the structure, size and composition (including the skills, knowledge and experience) required of the Board and
making recommendations regarding any changes in order to ensure that the composition of the Board and its Committees is
appropriate to the Group’s needs;
• overseeing succession planning for the Board and senior management and the leadership needs of the organisation;
• establishing processes for the identification of suitable candidates for appointment to the Board;
• making recommendations to the Board on membership of Board Committees.
The Nomination Committee is empowered to use the services of independent consultants to facilitate the search for suitable
candidates for appointment as non-executive Directors.
During the period under review the Nomination Committee met three times. The Nomination Committee considered:
• immediate succession requirements for non-executive directors. The Nomination Committee approved the appointment of two
non-executive directors as described below.
• immediate succession requirements for executive directors. The Nomination Committee approved the appointment of Stephen
Glancey as Group Chief Executive Officer and the appointment of Kenny Neison as Group Chief Financial Officer.
• the appointment of senior managers including the appointment of a managing director of the International Division.
• further succession planning in respect of non-executives, recognising the need for ongoing Board refreshment and renewal and
the need for independence and diversity on the Board.
• the strength of the leadership qualities amongst the team supporting the executive Directors.
• the adoption of updated Terms of Reference in line with the recommendations of the UK Code.
During the period under review the Nomination Committee approved the appointment of two new independent, non-executive
Directors. Candidates were identified through a variety of methods. The Nomination Committee, via the Chairman and the Group HR
Director, engaged Spencer Stuart, external search and recruitment agents, to identify potential candidates and to assist in selecting
and recommending candidates. Informal industry contacts were also used. The shortlisted candidates met with the Chairman and
the Group Chief Executive Officer prior to appointment. The candidates were appointed on the strength of their experience in the
beverage and FMCG sectors and their international experience.
Remuneration Committee
The Remuneration Committee comprises solely of independent, non-executive Directors. The members during the year were
Philip Lynch (Chairman), Liam FitzGerald and Richard Holroyd. Mr FitzGerald ceased to be a member of the Remuneration
Committee upon his resignation as a Director on 29 February 2012. Stewart Gilliland joined the Remuneration Committee on 17
April 2012.
The Remuneration Committee meets at least twice a year. During the period under review the Remuneration Committee met
seven times. Attendance at meetings held is set out in the table on page 46.
4 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
The Remuneration Committee’s responsibilities include:
• making recommendations to the Board on the Group’s policy for executive remuneration;
• determining the remuneration of the Chairman, the executive Directors, the Company Secretary and senior management;
• monitoring the level and structure of remuneration for senior management and trends across the Group;
• approving the design and targets of any performance-related pay schemes and the total annual payments made under such
schemes;
• reviewing the design of all share incentive plans;
• approving any grant of options or awards under the Executive Share Option Scheme, the Long Term Incentive Plan (Part I), the
Joint Share Ownership Plan and other share plans;
• overseeing any major changes in employee benefits structures throughout the Group;
• overseeing the preparation of the Report of the Remuneration Committee on Directors’ Remuneration.
The Remuneration Committee considered
• the determination of whether performance conditions under share schemes and bonus scheme were achieved;
• the granting of share options under the C&C Executive Share Option Schemes;
• the adoption of new performance conditions under the Long Term Incentive Plan (Part I) and the recommencing of awards
under the Plan;
• the adoption of a deferred bonus scheme under the Long Term Incentive Plan (Part II);
• the introduction of Irish and UK partnership and matching share schemes under the C&C All Employee Profit Sharing Scheme
and the introduction of a related overseas scheme;
• the granting of awards under the C&C Recruitment and Retention Plan;
• the remuneration of the executive directors following the directorate change;
• the remuneration of members of senior management;
• the adoption of updated Terms of Reference in line with the recommendations of the UK Code.
COMMUNICATIONS WITH SHAREHOLDERS
The Group attaches considerable importance to shareholder communications and has an established investor relations programme.
There is regular dialogue with institutional investors with presentations given to investors at the time of the release of Group first
half and full year financial results and when other significant announcements are made. Interim Management Statements were
issued in June 2011 and January 2012. The Board is briefed regularly on the views and concerns of institutional shareholders.
The Group’s website, www.candcgroupplc.com, provides the full text of the Annual Report and financial statements, the interim
report and other releases. News releases are also made available immediately after release to the Stock Exchange. Presentations
given to investors and at conferences are also made available on the website.
General Meetings
The Company operates under the Companies Acts 1963 to 2009. These Acts provide for two types of shareholder meetings: the
annual general meeting (‘AGM’) with all other meetings being called extraordinary general meetings (‘EGM’).
The Company must hold a general meeting in each year as its AGM in addition to any other general meetings held in that year.
Not more than 15 months may elapse between the date of one AGM and the next. An AGM was held on 29 June 2011, and this
year’s AGM will be held on 27 June 2012. The Directors may at any time call an EGM. EGMs shall also be convened on the
requisition of members holding not less than five per cent of the voting share capital of the Company.
The notice period for an AGM and an EGM to consider any special resolution (a resolution which requires a 75% majority vote,
not a simple majority) is 21 days. The Company may call any other general meeting on 14 days’ notice subject to obtaining
shareholder authority to do so. The Directors consider that it is in the interests of the Company to retain this flexibility, and intend
to seek annually such authority. As a matter of policy, the 14 day notice period will only be utilised where the Directors believe
that it is merited by the business of the meeting and the circumstances surrounding the business in question.
4 3
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE - CONTINUED
In accordance with UK Code recommendations, the annual report (if required) and the notice of annual general meeting are sent
to shareholders at least 20 working days before the AGM.
No business shall be transacted at any general meeting unless a quorum is present at the time when the meeting proceeds to
business. Three members present in person or by proxy and entitled to vote shall be a quorum.
Only those shareholders registered on the Company’s register of members at the prescribed record date, being a date not more
than 48 hours before the general meeting to which it relates, are entitled to attend and vote at a general meeting.
The Acts require that resolutions of the general meeting be passed by the majority of votes cast (ordinary resolution) unless the
Acts or the Company’s Articles of Association provide for 75% majority of votes cast (special resolution). The Company’s Articles
of Association provide that the Chairman has a casting vote in the event of a tie.
Any shareholder who is entitled to attend, speak and vote at a general meeting is entitled to appoint a proxy to attend, speak and
vote on his behalf. A proxy need not be a member of the Company.
At meetings, unless a poll is demanded, all resolutions are determined on a show of hands, with every shareholder who is
present in person or by proxy having one vote. On a poll every shareholder who is present in person or by proxy shall have one
vote for each share of which he/she is the holder. A shareholder need not cast all votes in the same way. At the meeting, after
each resolution has been dealt with, details are given of the level of proxy votes lodged for and against that resolution and also
the level of votes withheld on that resolution.
The Company’s AGM gives shareholders the opportunity to question the Directors. The Company must answer any question a
member asks relating to the business being dealt with at the meeting unless: answering the question would interfere unduly with
the preparation for the general meeting or the confidentiality and business interests of the Company; the answer has already
been given on a website in the form of an answer to a question; or it appears to the Chairman of the meeting that it is undesirable
in the interests of good order of the meeting that the question be answered.
The business of the Company is managed by the Directors who may exercise all the powers of the Company unless they are
required to be exercised by the Company in general meeting. Matters reserved to shareholders in general meeting include
the election of directors; the payment of dividends; the appointment of the external auditor; amendments to the articles of
association; measures to increase or reduce the share capital; and the authority to issue shares.
MEMORANDUM AND ARTICLES OF ASSOCIATION
The Company’s Memorandum of Association sets out the objects and powers of the Company. The Articles of Association detail
the rights attaching to each share class; the method by which the Company’s shares can be purchased or reissued; the provisions
which apply to the holding of and voting at general meetings; and the rules relating to the Directors, including their appointment,
retirement, re-election, duties and powers. Further details in relation to the purchase of the Company’s own shares are included
in the Directors’ Report.
CORPORATE RESPONSIBILITy
As part of its overall remit of ensuring that effective risk management policies and systems are in place, the Board examines the
significance of environmental, social and governance (ESG) matters to the Group’s business and it has ensured that the Group
has in place effective systems for managing and mitigating ESG risks. It also examines the impact that such risks may have on
the Group’s short and long-term value, as well as the opportunities that ESG issues present to enhance value. The Board receives
the necessary information to make this assessment in regular reports from the executive management.
Corporate responsibility is embedded throughout the Group. Group policies and activities are summarised on pages 24 to 29 and
the Group’s corporate responsibility report is available on the Group’s website www.candcgroupplc.com.
4 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
INTERNAL CONTROL
The Board has overall responsibility for the Group’s system of internal control, for reviewing its effectiveness and for confirming
that there is a process for identifying, evaluating and managing the significant risks affecting the achievement of the Group’s
strategic objectives. The process which has been in place for the entire period accords with the Turnbull Guidance (revised
guidance published in October 2005) and involves the Board considering the following:
• the nature and extent of the key risks facing the Group;
• the likelihood of these risks occurring;
• the impact on the Group should these risks occur;
• the actions being taken to manage these risks to the desired level.
The key elements of the internal control system in operation are as follows:
• clearly defined organisation structures and lines of authority;
• corporate policies for financial reporting, treasury and financial risk management, information technology and security, project
appraisal and corporate governance;
• annual budgets for all operating units, identifying key risks and opportunities;
• monitoring of performance against budgets on a weekly basis and reporting thereon to the Board on a periodic basis;
• an internal audit function which reviews key business processes and controls; and
• an audit committee which approves plans and deals with significant control issues raised by internal or external audit.
This system of internal control can only provide reasonable, and not absolute, assurance against material misstatement or loss.
The terms of reference of the Audit Committee require it to review the adequacy and effectiveness of the Group’s internal financial
controls and risk management systems. The risks facing the Group are reviewed regularly by the Audit Committee with the
executive management. Specific annual reviews of the risks and fundamental controls of each business unit are undertaken
on an ongoing basis, the results and recommendations of which are reported to and analysed by the Audit Committee with a
programme for action agreed by the business units.
The preparation and issue of financial reports, including consolidated annual financial statements is managed by Group
Finance with oversight from the Audit Committee. The key features of the Group’s internal control procedures with regard to the
preparation of consolidated financial statements are as follows:
•
•
•
•
the review of each operating division’s period end reporting package by the Group finance function;
the oversight, review and validation of consolidation journals by the Group Chief Financial Officer;
the challenge and review of the financial results of each operating division with the management of that division by the
Group Chief Financial Officer;
the review of any internal control weaknesses highlighted by the external auditor, by the Group Chief Financial Officer, Head of
Internal Audit and the Audit Committee; and the follow up of any critical weaknesses to ensure issues highlighted are addressed.
The Directors confirm that, in addition to the monitoring carried out by the Audit Committee under its terms of reference, they have
reviewed the effectiveness of the Group’s risk management and internal control systems up to and including the date of approval of
the financial statements. This had regard to all material controls, including financial, operational and compliance controls that could
affect the Group’s business. The Directors considered the outcome of this review and found the systems satisfactory.
GOING CONCERN
The principal risks and uncertainties facing the Group are set out in this report on pages 33 and 34. The financial position of
the Group, its cash flows, liquidity position and borrowing facilities are set out are set out in the Group Chief Financial Officer’s
Review on pages 18 to 23. A description of the business of the Group is set out in the Group Chief Executive Officer’s Review and
the Operations Review on pages 6 to 17.
An explanation of the basis on which the Group generates and preserves value over the longer term (the business model) and
the strategy for delivering its objectives are set out in the Group Chief Executive Officer’s review on pages 6 to 9. A statement of
the Group’s strategy is set out on pages 6 to 9. The Group’s long term strategy is to build a sustainable cider-led multi-beverage
business through a combination of organic growth and selective acquisitions. The Group’s business model seeks growth through
brand-market combination combining brand investment with a focus on local markets.
The Group has significant revenues, a large number of customers and suppliers across different geographies, and considerable
financial resources. For these reasons, the Directors have a reasonable expectation that the Company, and the Group as a whole,
have adequate resources to continue in operational existence for the foreseeable future. Consequently they continue to adopt the
going concern basis in preparing the financial statements.
4 5
DIRECTORS’ STATEMENT OF CORPORATE GOVERNANCE - CONTINUED
ATTENDANCE AT MEETINGS
Attendance at scheduled Board meetings and Board committee meetings during the year was as follows:
Sir Brian Stewart
John Burgess
John Dunsmore
Liam FitzGerald
Stephen Glancey
John Hogan
Richard Holroyd
Philip Lynch
Kenny Neison
Breege O’Donoghue
Scheduled
Board
Meetings
Audit
Committee
Meetings
9/9
7/9
9/9
6/9
9/9
9/9
9/9
9/9
9/9
7/9
5/8
8/8
8/8
Remuneration
Committee
Meetings
Nomination
Committee
Meetings
3/3
2/3
5/7
7/7
7/7
3/3
2/3
In the above table the numerator in each fraction represents the number of meetings actually attended by each Director in
respect of the Board and each Board committee of which he or she was a member, whilst the denominator represents the
number of such meetings that the Director was scheduled to attend.
In addition, the non-executive Directors including the Chairman met to evaluate the performance of the executive Directors,
and the non-executive Directors, led by the Senior Independent Director, without the Chairman present, met to evaluate the
performance of the Chairman. Several ad hoc meetings were held during the year for share allotment and other administrative
matters in accordance with the Board’s rules and procedures, which were attended by a quorum of the Board.
COMPLIANCE STATEMENT
The Group has complied with the provisions of the UK Code and Irish Annex throughout the period under review.
4 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION
INTRODUCTION
The last three years have seen a major improvement in the performance of the Group and substantial value created for
shareholders, as the executive Directors succeeded in delivering the Group’s turnaround plans since their appointment in 2008.
FY2012 was a year of change amongst the executive Directors of C&C with John Dunsmore being succeeded as Group Chief
Executive Officer by Stephen Glancey and Kenny Neison appointed as Group Chief Financial Officer as of 1 January 2012. This was
a smooth transition and ensured the Group remained focused on its growth plans and delivering on its objectives. The details of the
remuneration packages of the new appointees are set out below.
Their appointment also coincided with the vesting of the final tranche of Interests awarded to the executive Directors under the Joint
Share Ownership Plan (JSOP). This award was made with shareholder approval in December 2008. As a replacement for the JSOP,
the new remuneration packages include an entitlement to an award under the Long Term Incentive Plan (LTIP (Part I)) in tandem
with their existing entitlement under the current Executive Share Option Scheme (ESOS).
The vesting of awards under the JSOP means that Stephen Glancey and Kenny Neison now hold, respectively, shares in C&C with a
value equivalent to 27 times and 19 times their new salaries, which is well in excess of typical executive shareholdings. In order to
encourage the retention of such a large holding and alignment of their interests with those of other shareholders, the Remuneration
Committee, is seeking shareholder approval at the AGM to allow dividends to be paid on vested awards under the JSOP and also
enable it, where desirable, to agree to extend the period during which vested awards may remain in the JSOP and allow participants
greater scope to transfer vested awards to family members and related trusts.
It is also seeking approval to allow dividend equivalents to accrue under the LTIP (Part I). Further details are given below and in
the notice of AGM.
The Remuneration Committee considers that the appointment of the executive Directors to their roles and the performance-related
incentives agreed with them and the alignment of their interests with shareholders generally are critical to the success of the Group
as it continues to pursue its strategic aims.
BASIS OF REPORT
The following pages set out the Board’s remuneration policy as it applies to the executive Directors. In accordance with the UK
Corporate Governance Code (whilst this is not a legal requirement) the Directors are proposing at the 2012 Annual General Meeting
an advisory non-binding vote to receive and consider this report of the Remuneration Committee on Directors’ Remuneration.
COMPOSITION
The Remuneration Committee of the Board consists solely of independent non-executive Directors. Philip Lynch is Chairman of the
Committee. During the year ended 29 February 2012 other members of the Committee were Richard Holroyd and Liam FitzGerald
(resigned 29 February 2012). Stewart Gilliland joined the Committee on 17 April 2012.
The Chairman of the Board and the Group Chief Executive Officer are fully consulted on remuneration proposals but neither is present
when his own remuneration is discussed. The Remuneration Committee obtains external advice from remuneration consultants
and other independent firms on compensation when necessary. During the year ended 29 February 2012 the Committee obtained
advice from Towers Watson in respect of the executive Directors’ remuneration and from New Bridge Street (formerly known as
Hewitt New Bridge Street), an Aon Hewitt company, in respect of the Group’s employee share schemes and other matters. A separate
division of Towers Watson has advised the trustees of the Group’s defined benefit schemes but the Committee was satisfied that this
did not compromise their independence. Apart from that, neither of the consultants has any other connection with the Group. The
Remuneration Committee also obtains advice from the Company Secretary and the Group Human Resources Director.
TERMS OF REFERENCE OF COMMITTEE
The Committee’s terms of reference, which are available on the C&C website www.candcgroupplc.com, include making
recommendations to the Board in respect of Group policy on executive and senior management remuneration and the consideration
and determination of the remuneration of the executive Directors and senior management. The Committee also oversees the
Group’s employee share schemes.
REMUNERATION POLICy
The main aim of the Group’s remuneration policy is to attract, retain and reward the Group’s executive Directors and senior
management, having regard to the need to ensure that they are properly remunerated and motivated to perform in the best interests
of shareholders and having regard also to comparative remuneration levels in the sector and amongst other Irish and UK-listed
companies of similar size and scope as well as pay levels and conditions across the rest of the Group.
A key policy adopted by the Group for the remuneration of executive Directors and senior management is to align their interests
with those of shareholders through appropriate share-based long-term incentives. In addition, performance-related annual rewards
aligned with the Group’s key financial and operational goals and based on stretching targets are an important component of the total
executive remuneration package.
Furthermore, the Group seeks to bring transparency to Directors’ and employees’ reward structures through the use of cash
allowances in place of benefits in kind and to align the interests of Directors and other employees with those of shareholders
through share-based and performance-based rewards.
4 7
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION
- CONTINUED
DIRECTORATE CHANGE
As announced on 19 October 2011, Stephen Glancey was appointed Chief Executive Officer of the Group and Kenny Neison Chief
Financial Officer of the Group in each case with effect from 1 January 2012. Consequently, the Remuneration Committee reviewed
the remuneration of each of them to reflect their new roles and responsibilities.
It was agreed that the salary for the Group Chief Executive Officer role should remain at the level fixed for John Dunsmore’s
appointment to that role in November 2008. The salary for the Group Chief Financial Officer role is the same as that previously
applicable to the Group Chief Operating Officer. Previous entitlements to a guaranteed 3% annual increase, which had been waived,
are now removed. The salaries are now expressed as the pounds sterling equivalent. Accordingly the following annual basic salaries
were agreed with effect from 1 January 2012, and are subject to annual review in the same way as for other employees:
Stephen Glancey
Kenny Neison
£585,000 (equivalent to €698,600 at the year-end exchange rate)
£420,000 (equivalent to €501,500 at the year-end exchange rate)
The Remuneration Committee also agreed that any annual bonus for each executive Director under the Group’s performance-
related cash bonus scheme, payments in respect of pension and benefits and cover for life insurance and permanent health
insurance would be calculated on the same basis as previously but by reference to each Director’s new annual basic salary. It was
also agreed that each of them would continue to be entitled to an annual grant under the C&C Executive Share Option Scheme at
150% of their revised annual basic salary with effect from FY2013.
Since the executive Directors’ awards under the JSOP had all fully vested and there was no entitlement to any further awards under
that Plan, it was agreed that each executive Director would be entitled to an annual award under the LTIP (Part I) at 100% of annual
basic salary. All awards are made subject to performance and all incentive schemes are subject to review. However, the Board stated
its intention that in the event of a review an equivalent value as above should be offered to the executive Directors, whether by way of
LTIP (Part I) or other incentive scheme in order to maintain the market competitiveness of each executive Director’s package.
It was further agreed that each Director’s bonus entitlement (if any) for FY2012 would be calculated by reference to his new annual basic
salary for the whole financial year and exceptionally an award under the LTIP (Part I) would be made in FY2012 at 100% of the new salary.
For further details of bonus arrangements see Performance Related Annual Bonus on page 49.
The other principal terms and conditions of the Director’s service contract were unchanged.
The Group accepted the resignation of John Dunsmore and agreed with him that he would cease to be Group Chief Executive Officer
on 31 December 2011 and would cease to be an executive Director and employee in the Group on 29 February 2012. It was agreed
that he would continue to be entitled to a payment equal to his bonus (subject to achievement of bonus targets) in respect of FY2012
but no other compensation for loss of office was paid. Any notice due under his service contract was waived. All of Mr Dunsmore’s
Interests in the Joint Share Ownership Plan vested prior to the cessation of his employment and it was agreed that he was entitled
to retain them within the Plan, which he has elected to do. It was also agreed that any options held by him under the Executive Share
Option Scheme lapsed upon cessation of his employment.
EXECUTIVE DIRECTORS’ REMUNERATION
The main elements of the remuneration package for the executive Directors and senior management are basic salary and benefits
(including contributions to, or in lieu of, pension, company car and health benefits), performance-related annual bonus and longer
term share incentives.
A summary of the remuneration applicable to the executive Directors is as follows:
Fixed Remuneration
Performance-linked remuneration
Base salary – subject to
discretionary review.
Benefits – a 7.5% cash
allowance for car and health
benefits.
Pension – allowance of 25% of
basic salary as cash or pension
contribution.
Annual incentives
Long term incentives
Cash bonus – up to a maximum of
80% of basic salary, subject to the
achievement of a Group operating
profit target.
Annual share option grants - 150% of basic salary
under the Executive Share Option Scheme with a pre-
vesting earnings per share performance target; no
retesting permitted
Up to Fy2012: Joint Share Ownership Plan – awards,
subject in part to the achievement of a share price
performance condition, granted in December 2008 to
facilitate recruitment. Plan approved by shareholders at
an EGM in December 2008.
From Fy2012: Annual award under the LTIP (Part I) -
100% of basic salary subject to three-year earnings
per share growth and Total Shareholder Return
performance conditions; no retesting permitted
4 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
The composition of each executive Director’s on-target and maximum remuneration for FY2013 is as follows:
Target scenario
Base salary
Assumes target bonus at 60% of base salary
Expected value
Base
Bonus
Options
LTIP (Part I) Threshold vesting - 30%
Pension
Total
Pension allowance - 25% of base salary
Mix
40%
24%
14%
12%
10%
100%
Maximum scenario
Base salary
Assumes max bonus at 80% of base salary
Expected value
Full vesting - 100%
Pension allowance - 25% of base salary
Mix
27.5%
22%
16%
27.5%
7%
100%
SERVICE CONTRACTS OF EXECUTIVE DIRECTORS
Each of the executive Directors is employed on a service contract. None of them has a service contract with a notice period in
excess of one year. The service contracts do not contain any pre-determined compensation payments in the event of termination
of office or employment. Details of the service contracts of the executive Directors in office during the year are as follows:
John Dunsmore
Stephen Glancey
Kenny Neison
Contract date
9 November 2008
9 November 2008, amended 28 February 2012
9 November 2008, amended 28 February 2012
Notice period
12 months
12 months
12 months
Unexpired
term of contract
n/a
n/a
n/a
Basic Salary and Benefits
The salary levels of executive Directors are normally reviewed together with those of senior management annually in January.
The executive Directors receive a cash allowance of 7.5% of basic salary in lieu of benefits such as company car or health
benefits. The Group also provides death-in-service cover of four times annual basic salary.
Pensions
No current executive Director or member of senior management accrues any benefits under a defined benefit pension scheme.
Payments in respect of pensions are calculated on basic salary only and no incentive or benefit elements are included.
Under their service contracts Stephen Glancey and Kenny Neison each receive a cash payment of 25% of basic salary, in order to
provide their own pension benefits, inclusive in Kenny Neison’s case of a fixed sterling payment into a personal pension plan.
Performance Related Annual Bonus
The Group operates a performance-related cash bonus scheme for executive Directors, senior management and other
employees. The maximum annual bonus payable is 80% of basic salary for the executive Directors, 70% for senior management
and lesser amounts for other employees. The performance metric for bonuses for the executive Directors is Group operating
profit and the target is set in accordance with the Group’s long-term growth plan. The executive is entitled to a reduced bonus
of 30% when a minimum threshold is achieved, a basic bonus totalling 60% when a target threshold is achieved and a further
bonus of 20% when performance achieves a higher ‘stretch’ threshold. For the year ended 29 February 2012 the Remuneration
Committee determined that the target threshold for the executive Directors was achieved and bonuses have been accrued and
will be paid to them at this level.
The Remuneration Committee does not require any part of the executive Directors’ annual cash bonus to be deferred, whether
into shares or otherwise. The Committee recognises the arguments for deferral but believes that, in view of their substantial
shareholdings in the Company, the executive Directors are already adequately motivated to be mindful of the longer-term
consequences of their operational and strategic decisions.
The bonus scheme and the payment of bonuses are subject to annual approval by the Remuneration Committee. The Committee
reserves the right to vary, amend, replace or discontinue the bonus scheme at any time depending on business needs and/
or financial viability or as appropriate by reference to any changes in corporate structure during the financial year. The
Remuneration Committee has approved a bonus scheme for the year ending 28 February 2013 with a similar structure to that
described above.
Share Options and Share Awards
The service contracts of the executive Directors in office at the date of this report entitle them to an annual grant under the C&C’s
Executive Share Option Scheme of share options with a value equal to 150% of basic salary and an annual award under the LTIP
(Part I) of shares (by way of nil cost options) with a value equal to 100% of annual basic salary. The Board will continue to review
all incentive schemes annually and all awards are made subject to performance.
Details of the interests of the Directors in share options and share awards granted under the Joint Share Ownership Plan, the
Executive Share Option Scheme, and the LTIP (Part I) are set out on page 51 (Joint Share Ownership Plan), pages 54 and 55
(Executive Share Option Scheme and LTIP (Part I)) and in note 4 on pages 81 to 85.
4 9
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION
- CONTINUED
EXECUTIVE SHARE OPTION SCHEME
The C&C Executive Share Option Scheme was established in May 2004. Options are granted solely at the discretion of the
Remuneration Committee save where the executive has a contractual entitlement. Under the scheme rules, options cannot be
granted to non-executive Directors. In respect of grants since admission, the maximum grant that can normally be made to any
individual in any one year is an award of 150% of basic salary in that year.
Options will not normally be exercisable until three years after the date of grant and are subject to meeting a specific performance
target. This performance target requires the Group’s earnings per share (before exceptional items, and including any other
adjustments authorised by the Remuneration Committee) to increase by 5% per annum in excess of the change in the Irish
Consumer Price Index (Irish CPI) over the three year period from date of grant, in order for options to vest.
The options lapse if the performance target is not met after the relevant three year period. There is no re-testing provision in the
event of a change of control of the Company. However, for qualifying leavers in circumstances such as death, ill-health, redundancy
or business disposal, the performance target may be measured over a shorter time period, and if the Remuneration Committee
determines that the target is met, the options may be exercised within a reduced time period.
The fair value cost of the share options is amortised over the vesting period to the extent that the Directors believe that the options
will vest. The fair value of each award is disclosed in note 4 to the Financial Statements (Share Based Payments) on pages 81 to 85.
In 2010 the Group established Part 2 of the Scheme, which is a scheme approved by the UK Revenue authorities and allows grants of
options over shares with a market value of up to £30,000 to be made on a tax efficient basis to employees who are UK taxpayers.
LONG TERM INCENTIVE PLAN (Part I) (LTIP (Part I))
The C&C share-based LTIP (Part I) for executive Directors and senior management was established at the time of the Group’s
admission to listing in May 2004. Under the plan, awards of up to 100% of basic salary may be granted. Awards are in the form of nil-
cost options over shares, based on the closing share price on the day before the grant date.
For awards made during FY2012, the Remuneration Committee revised the performance conditions in the light of current best
practice as set out below. The performance conditions were chosen as a dual metric to align the interests of participants with those
of shareholders while at the same time providing a target related to the Group’s financial performance. The Committee considers
that this dual-metric performance condition is sufficiently stretching to ensure that participants are rewarded only if shareholders’
interests are successfully met.
As to 50% of the award, a performance condition relating to relative total shareholder return (TSR) applies, with an underpin as
mentioned below. 30% of this part of the award vests if the Group’s TSR over a three-year period equals the median TSR of a
comparator group; 100% of this part of the award vests if the Group’s TSR over a three-year period equals or exceeds the TSR of
the upper quartile of the comparator group; for performance between the median and the upper quartile there is straight-line
pro-rating between 30% and 100%. None of this part of the award vests if the Group’s TSR over a three-year period is less than the
median TSR of a comparator group. The companies in the comparator group are as follows: Anheuser-Busch Inbev N.V., Carlsberg
Breweries A/S, Constellation Brands Inc., Diageo plc, Heineken Holding N.V., Molson Coors Brewing Company, Remy Cointreau SA,
SABMiller plc, Britvic plc, Greene King plc, Marston’s plc, Young & Co.’s Brewery plc and AG Barr plc. TSR is calculated by reference
to the change in the net return index for each comparator company, as calculated by an independent financial information provider
selected by the Committee from time to time.
As to the remaining 50% of the award, a performance condition relating to growth in earnings per share (EPS) applies. 30% of this
part of the award vests if the Group’s EPS over a three year period achieves 4% per annum growth in real terms (compared with Irish
CPI). 100% of this part of the award vests if the Group’s EPS over a three year period achieves 10% per annum real growth. There is
straight-line pro-rating between 30% and 100% for performance between 4% and 10% per annum. None of this part of the award
vests if the real growth in the Group’s EPS over a three-year period is less than 4% per annum. EPS is calculated before exceptional
items and including other adjustments authorised by the Remuneration Committee.
In respect of the TSR condition, an underpin applies: the growth in the Group’s EPS over the three-year period must be 5% or more
per annum in real terms (compared with Irish CPI) over the same period; alternatively the Remuneration Committee must be
satisfied that the Group’s underlying financial performance warrants that level of vesting; otherwise the award lapses.
Currently, awards that vest under the Plan do not reflect any equivalent value to that which accrues to shareholders by way of
dividends during the vesting period. In order to achieve a better alignment of the interests of participants in the Plan with the
interests of shareholders, the Company is proposing that upon vesting such equivalent value should accrue to the participant. Where
awards do not vest, then nor would any such equivalent value representing rolled up dividends by way of scrip or cash amount. A
resolution to implement this variation of rights will be proposed at the Annual General Meeting to be held in June 2012 and further
information is contained in the Notice of AGM. The amendment will not be retrospective. The fair value cost of the share awards is
amortised over the vesting period to the extent that the Directors believe that the awards will vest. The fair value of each award is
disclosed in note 4 to the Financial Statements (Share Based Payments) on pages 81 to 85.
5 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
C&C JOINT SHARE OWNERSHIP PLAN
In order to secure the services of John Dunsmore, Stephen Glancey and Kenny Neison in November 2008, a remuneration package
was agreed which included a high level of share-based incentives under the C&C Joint Share Ownership Plan, which was approved
by shareholders at an Extraordinary General Meeting (‘EGM’) on 18 December 2008. The Remuneration Committee supervises the
operation of the Plan. The main terms of the Plan are as follows:
Participants
Awards were granted to John Dunsmore, Stephen Glancey and Kenny Neison in December 2008. In total they acquired interests in
12.8 million ordinary shares, out of the 16.0 million shares allocated to the Plan. Interests in the remaining 3.2 million shares were
granted in June and December 2009 to existing and new members of senior management.
Nature of interests
Interests take the form of a restricted interest in ordinary shares in the Company (“Interest”). An Interest permits a participant to
benefit from the increase (if any) in the value of a number of ordinary shares in the Company (“Shares”) over which the Interest is
acquired. In order to acquire an Interest, a participant must enter into a joint share ownership agreement with the trustees of the
Group’s employee benefit trust under which the participant and the trustee jointly acquire the Shares. Under the terms of the plan
participants must contribute funding equal to 10% of the issue price on the acquisition of the Interest (the “Entry Price”) with the
balancing amount (the “Hurdle Value”) being funded by the trustees of the employee benefit trust.
For Interests acquired in December 2008 and June 2009, the Entry Price was €0.115 per share and the Hurdle Value was €1.035 per
share and for the Interests acquired in December 2009, the Entry Price was €0.247 per share and the Hurdle Value was €2.223.
When an Interest vests, the trustees may, at the request of the participant and on payment of the balance of the further amount
referred to below, transfer shares to the participant of equal value to the participant’s Interest or the Shares may be sold by the
trustees, who will account to the participant for the difference between the sale proceeds (less expenses) and the Hurdle Value.
Rights attaching to Interests
The voting rights attaching to the Shares subject to the Interests will be exercised by the trustees of the employee benefit trust as
they consider appropriate and in the best interests of the beneficiaries of the employee benefit trust, save that each participant may
direct the votes on his vested Interests or, if greater, 10% of the Shares relevant to his Interest.
Dividends on the Shares subject to the Interests accrue solely to the trustees of the employee benefit trust but have been waived by
them. In order to achieve a better alignment of the interests of those Directors and employees who participate in the Plan with the
interests of shareholders and to encourage retention of interests within the Plan, the Company is seeking shareholder approval at the
AGM to a proposal that, where Interests have vested, dividends on the jointly-owned Shares should accrue to the trustees and to the
participant in proportion to their respective economic interests. This would not apply where Interests do not vest and would only apply to
continuing employees. The amendment will not be retrospective. Currently if Plan Shares have not been sold by the seventh anniversary
of their acquisition date, the Trustees must then sell them and pay the Participant his share of the sale proceeds on the first permitted
dealing day thereafter. The Company is seeking shareholder approval at the AGM to enable it, where desirable, to extend this period to
the tenth anniversary of the acquisition date, thereby allowing participants greater flexibility in determining when to realise their vested
interests. The Company is also seeking shareholder approval to allow it to give greater flexibility to participants who are continuing
employees to transfer their vested interests to family members and related trusts.
The Company believes these amendments will encourage retention of vested interests in the Plan. A resolution to implement these
variations of rights will be proposed at the Annual General Meeting to be held in June 2012 and further information is contained in
the Notice of AGM.
Vesting conditions
All of the Interests are subject to a time-vesting condition with one-third of the Interest in the Shares vesting on each of the first,
second and third anniversaries of acquisition. Half of the Interests in the Shares are subject to an additional pre-vesting share
price target. In order for these latter Interests to vest, for the Interests granted to the executive Directors in December 2008 the
Company’s share price must be greater than €2.50 for at least 20 days out of 40 consecutive dealing days during the five-year period
commencing on the date of acquisition of the Interest. This vesting condition was met during 2009. Accordingly as at 29 February
2012, all of the Interests awarded to the current and former executive Directors in December 2008 had vested.
Loans and further amounts
The award of an Interest under the Plan may give rise to a loan for tax and company law purposes as described under loans to
Directors on page 55.
5 1
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION
- CONTINUED
OTHER EMPLOyEE SHARE SCHEMES
In addition to the above schemes, the executive Directors are eligible to participate on the same terms as all other eligible
employees in the UK Revenue-approved Share Incentive Plan that the Company operates. The Group has established a number
of other share-based schemes, in which Directors are not eligible to participate, details of which are also given in note 4 to the
Financial Statements (Share Based Payments) on pages 81 to 85.
During the year, the Remuneration Committee finalised its consideration of a review of the Group’s employee share schemes
in the light of current best practice and experience gained from previous awards. The Committee approved the resulting
recommendations. In consequence the performance condition under the LTIP (Part I) was reformulated and the Committee
recommenced awards under this Plan to executive Directors and senior management within existing limits. The Committee also
approved the introduction of a deferred bonus share scheme under the LTIP (Part II). This scheme is not open to executive Directors
and will be settled by market purchases. Discretionary awards were made to middle management. The Committee discontinued
awards under the C&C Executive Share Option Scheme apart from contractual awards to the executive Directors and a few other
exceptional awards.
The Committee approved the introduction of share matching plans in Ireland and the UK under the Approved Profit Sharing Scheme.
A further scheme for overseas employees was introduced. These schemes are open to executive Directors and will be settled by
market purchases. Further details are given on page 83.
In consequence of its review, the Company is proposing amendments to Parts A and B of the C&C Profit Sharing Scheme (APSS),
to take account of current best and market practice and to bring the Irish PSS and the UK SIP into closer alignment to the extent
permitted by the applicable legislation. Approval is also being sought to reapprove the APSS (as amended) so that it can be used
for a further 10 years without having to go back to shareholders. A resolution to implement these variations will be proposed at the
Annual General Meeting to be held in June 2012.
SHAREHOLDING GUIDELINES
The Company does not impose minimum shareholding requirements on executive Directors. However, the current executive
Directors, Stephen Glancey and Kenny Neison, have significant shareholdings in the Company as set out below, representing
approximately 27 and 19 times their respective base salary, well in excess of usual formal shareholding guidelines (generally
between one and 2½ times base salary). The Remuneration Committee is therefore of the view that the executive Directors’ interests
are sufficiently aligned with those of other shareholders without the need for additional shareholding guidelines.
DILUTION LIMITS
Full details of the share awards and the maximum dilution are given in note 4 (Share Based Payments) on pages 81 to 85 . All share
plans with the exception of the Joint Share Ownership Plan, which was specifically approved by shareholders in December 2008,
contain the share dilution limits recommended in institutional guidance, namely that no awards shall be granted which would cause
the number of Shares issued in the ten years ending with the date of grant (a) under any discretionary or executive share scheme
adopted by the Company other than the Joint Share Ownership Plan to exceed 5 per cent., and (b) under any employees’ share
scheme adopted by the Company other than the Joint Share Ownership Plan to exceed 10 per cent., of the ordinary share capital of
the Company in issue at that time.
In the period from the listing of the Group on the Irish Stock Exchange in 2004 to 29 February 2012, commitments to issue new
shares or re-issue treasury shares under discretionary share schemes (net of lapsed and forfeited commitments and excluding
the Joint Share Ownership Plan which was specifically approved by shareholders in December 2008) amounted to 3.46% of the
Company’s issued ordinary share capital as at 29 February 2012. No equivalent commitments have been made under non-
discretionary schemes.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Each of the non-executive Directors in office during the financial year was appointed by way of a letter of appointment. Each
appointment was for an initial term of three years, renewable by agreement (but now subject to annual re-election by the members
in General Meeting). The letter of appointment of Sir Brian Stewart is dated 10 February 2010. The letters of appointment of all other
non-executive Directors in office during the financial year were dated 26 April 2004. The letters of appointment are each terminable
by either party on one month’s notice and do not contain any pre-determined compensation payments in the event of termination of
office or employment.
The remuneration of the non-executive Directors is determined by the Board of Directors as a whole. The Chairman is not involved in
determining his own remuneration. Non-executive Directors receive a Director’s fee and fees directly relating to their membership
of Board sub-committees but no additional remuneration from the Company. The fees paid to non-executive Directors are set at a
level which aims to attract individuals with the necessary experience and ability to make a significant contribution to the Group. No
increase has been made to the basic and supplemental fees of the non-executive Directors since 2008.
5 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
The current annual fees are as follows:
Chairman:
Non-executive Director:
Supplemental fees:
Senior Independent Director:
Chairman of the Audit Committee:
Chairman of the Remuneration Committee: €20,000.
€230,000
€65,000
€10,000
€25,000
Non-executive Directors are not eligible to participate
in the Group’s share option or other employee scheme.
None of the remuneration of the non-executive Directors
is performance related. Non-executive Directors’ fees
are not pensionable and non-executive Directors are not
eligible to join any Group pension plan. The Group also
does not impose minimum shareholding requirements
on non-executive Directors but encourages them to hold
shares in the Company.
5 yEAR TOTAL SHAREHOLDER RETURN
100
80
60
40
20
0
)
€
(
e
u
l
a
V
28 Feb 07
29 Feb 08
28 Feb 09
28 Feb 10
28 Feb 11
29 Feb 12
C&C Group
ISEQ General Index
This graph shows the value, by 29 February 2012, of €100 invested in C&C Group on 28 February 2007
compared with the value of €100 invested in the ISEQ General Index. The other points plotted are the
values at intervening financial year-ends.
For information only, the above graph shows the value as at 29 February 2012 of a €100 investment in C&C Group plc shares on 28
February 2007 compared with the ISEQ General Index.
DIRECTORS’ REMUNERATION AND INTERESTS IN SHARE CAPITAL
Details of the overall Directors’ remuneration charged to the Group income statement are shown in note 27 on pages 117 to 118. Details
of the remuneration and pension benefits for each Director who served during the year ended 29 February 2012 are given on this page.
The interests of the Directors and Company Secretary in the share capital of the Company and in share options are shown on pages 54
and 55. Loans to Directors are shown on page 55.
DIRECTORS’ REMUNERATION – 2012
Basic
salary/fees
€0
Other
remuneration
fees (ii)
€0
Further
amount(iii)
€0
Benefits
in kind(iii)
€0
Pension
contribution
(or equivalent)
€0
Executive Directors
John Dunsmore(i)
Stephen Glancey
Kenny Neison
Sub-total
Non-Executive Directors
John Burgess
Liam FitzGerald
John Hogan
Richard Holroyd
Philip Lynch
Breege O’Donoghue
Sir Brian Stewart
Sub-total
700
534
334
1,568
65
65
65
65
65
65
230
620
53
40
25
118
-
-
25
10
20
-
-
55
111
-
-
111
-
-
-
-
-
-
-
-
4
4
3
11
-
-
-
-
-
-
-
-
Annual
Bonus
€0
420
419
301
Total
2012
€0
1,463
1,131
748
Total
2011
€0
989
724
405
175
134
85
394
1,140
3,342
2,118
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65
65
90
75
85
65
230
675
65
65
90
75
85
65
178
623
2,188
173
111
11
394
1,140
4,017
2,741
Equity-settled share-based employee benefits
Total
Average number of executive Directors
Average number of non-executive Directors
282
4,299
1,386
4,127
3
7
3
7
(i)
The Board released John Dunsmore to serve on the Board of Fuller Smith & Turner Plc as a non-executive director and chairman of its Remuneration Committee. He received
and retained an annual fee of £45,000 in relation to this role.
(ii) Other fees paid to John Hogan, Richard Holroyd and Philip Lynch in 2012 and 2011 represent fees paid as Chairman of the Audit Committee, Senior Independent Director and
Chairman of the Remuneration Committee respectively.
(iii) See ‘Loans to Directors’ on page 55.
No sums were paid to third parties for any Director’s services.
Directors and their interests
The interests of the Directors and Company Secretary in office at 29 February 2012 in the share capital of Group companies at the
beginning of the year (or date of appointment if later) and the end of the year were:
5 3
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION
- CONTINUED
INTERESTS IN ORDINARy SHARES OF €0.01 EACH IN C&C GROUP PLC(i)
Directors
John Burgess
John Dunsmore
Liam FitzGerald
Stephen Glancey
John Hogan
Richard Holroyd
Philip Lynch
Kenny Neison
Breege O’Donoghue
Sir Brian Stewart
Total
Company Secretary
Paul Walker
29 February 2012 1 March 2011 (or date of
appointment if later)
104,097
5,120,000 (ii)
35,000
5,120,000 (ii)
10,324
32,933
821,692
2,561,530 (ii)
59,823
60,000
102,299
5,120,000 (ii)
35,000
5,120,000 (ii)
10,147
22,349
807,913
2,561,530 (ii)
58,790
60,000
13,925,399
13,898,028
36,200
9,200
Notes
(i) All the above holdings are beneficial interests subject as stated in (ii) below.
(ii) Each shareholding of the executive Directors includes Interests in shares acquired and held under the Company’s Joint Share Ownership Plan which at 29 February 2012 and
at 28 February 2011 was 3,413,334 shares in respect of each of John Dunsmore and Stephen Glancey and 2,560,000 shares in respect of Kenny Neison (see C&C Joint Share
Ownership Plan on page 51 and note 4 on pages 81 to 85 for further details). The Company has been notified that the balance of the holding in which each of J. Dunsmore and S.
Glancey is interested is beneficially owned by his respective wife.
The Directors and the Company Secretary have no beneficial interests in any of the Group’s subsidiary undertakings.
There was no movement in the Directors’ or the Company Secretary’s interests in C&C Group plc ordinary shares between
29 February 2012 and 16 May 2012.
INTERESTS IN OPTIONS OVER ORDINARy SHARES OF €0.01 EACH IN C&C GROUP PLC
Date
of grant
Exercise
price
Scheme
Exercise
Total at 1 Awarded Exercised
Lapsed
period March 2011
(or date of
appointment
if later)
13/05/09
€1.94
26/05/10 €3.205
24/05/11 €3.6065
ESOS 13/5/12 - 12/5/16
ESOS 26/5/13 - 25/5/17
ESOS 24/5/14 - 23/5/18
541,300
327,700
291,140
(541,300)
(327,700)
(291,140)
Total
869,000 291,140
- (1,160,140)
Total at 29 Weighted
Average
February
Price
2012
-
-
-
-
-
13/05/09
€1.94
26/05/10 €3.205
24/05/11 €3.6065
29/02/12
ESOS 13/5/12 - 12/5/16
ESOS 26/5/13 - 25/5/17
ESOS 24/5/14 - 23/5/18
1/3/15 - 28/8/15
386,600
234,100
207,957
191,186
386,600
234,100
207,957
191,186
€0.00 LTIP (Part I)
Total
620,700 399,143
-
- 1,019,843 €2.21
13/05/09
€1.94
26/05/10 €3.205
24/05/11 €3.6065
29/02/12
ESOS 13/5/12 - 12/5/16
ESOS 26/5/13 - 25/5/17
ESOS 24/5/14 - 23/5/18
1/3/15 - 28/8/15
232,000
140,500
124,774
137,262
232,000
140,500
124,774
137,262
€0.00 LTIP (Part I)
Total
372,500 262,036
-
- 634,536 €2.13
Directors
John Dunsmore
Stephen Glancey
Kenny Neison
Company Secretary
Paul Walker
01/06/10
01/06/10
29/06/11
1/6/11 - 31/5/17
€0.00
€3.21
1/6/13 - 31/5/18
€0.00 LTIP (Part I) 29/6/14 - 28/12/14
R&R
ESOS
81,000
127,200
35,380
27,000 (i)
54,000
127,200
35,380
Total
243,580
- 27,000
- 216,580 €1.89
(i) market price at date of exercise: €2.95
Key: ESOS - Executive Share Option Scheme; LTIP (Part I) - Long Term Incentive Plan (Part I); R&R - Recruitment and Retention Plan.
5 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
No price was paid for any award of options. The price of the Company’s ordinary shares as quoted on the Irish Stock Exchange
at the close of business on 29 February 2012 was €3.665 (2011: €3.535). The price of the Company’s ordinary shares ranged
between €2.70 and €3.69 during the year.
There was no movement in the interests of any of the Directors or the Company Secretary in options over C&C Group plc ordinary
shares between 29 February 2012 and 16 May 2012.
LOANS TO DIRECTORS
When an award is granted to an executive under the Joint Share Ownership Plan, its value is assessed for tax purposes with the
resulting value being deemed to fall due for payment on the date of grant. Under the terms of the plan, the executive must pay
the Entry Price at the date of grant and, if the tax value of the award (i.e. the initial unrestricted market value) exceeds the Entry
Price, the executive must pay a further amount, equating to the amount of such excess, before a sale of the awarded interests.
The deferral of the payment of the further amount is considered to be an interest-free loan by the Company to the executive and a
taxable benefit-in-kind arises, charged at Revenue stipulated rates (Ireland 12.5%, UK 4.0%). The resulting loans by the Company
to the executive Directors are required to be disclosed under the Companies Act 1990.
The balances of the loans outstanding to the executive Directors as referred to in the previous paragraph as at 29 February 2012
and 28 February 2011 are as follows:
John Dunsmore
Stephen Glancey
Kenny Neison
Total
29 February
2012
€’000
28 February
2011
€’000
-
111
83
194
111
111
83
305
When the further amount is paid, the Company compensates the executive for the obligation to pay this further amount by paying
him an equivalent amount, which is, however, subject to income tax in the hands of the executive. During the financial year
ended 29 February 2012, John Dunsmore paid a further amount of €110,934, thus repaying the full balance of the loan which was
outstanding at 28 February 2011, for which the Company compensated him (subject to deduction of tax). The compensation is
disclosed under Further Amount in Directors’ Remuneration.
5 5
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Group and Company financial statements, in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that
law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the EU and have elected to prepare the Company financial statements in accordance with IFRSs
as adopted by the EU and as applied in accordance with the Companies Acts 1963 to 2009.
The Group and Company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial
position and performance of the Group and Company. The Companies Acts 1963 to 2009 provide in relation to such financial
statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to
their achieving a fair presentation.
In preparing each of the Group and Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state that the financial statements comply with IFRSs as adopted by the EU and, in the case of the Company, as applied in
accordance with the Companies Acts 1963 to 2009; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
Under applicable law and the requirements of the Listing Rules issued by the Irish Stock Exchange, the Directors are also
responsible for preparing a Directors’ Report and reports relating to Directors’ remuneration and corporate governance that
comply with that law and those Rules. In particular, in accordance with the Transparency (Directive 2004/109/EC) Regulations
2007 (the “Transparency Regulations”), the Directors are required to include in their report a fair review of the business and a
description of the principal risks and uncertainties facing the Group.
The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial
position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Acts 1963
to 2009 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
RESPONSIBILITy STATEMENT, IN ACCORDANCE WITH THE TRANSPARENCy REGULATIONS
Each of the Directors, whose names and functions are listed on page 32, confirms that, to the best of his or her knowledge and belief:
• the Group financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets,
liabilities and financial position of the Group at 29 February 2012 and its profit for the year then ended;
• the Company financial statements, prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with
the Companies Acts 1963 to 2009, give a true and fair view of the assets, liabilities and financial position of the Company at 29
February 2012; and
• the Directors’ report contained in the Annual Report includes a fair review of the development and performance of the business
and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.
On behalf of the Board
Sir Brian Stewart
Stephen Glancey
Chairman
Group Chief Executive Officer
5 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
INDEPENDENT AUDITOR’S REPORT
to the members of C&C Group plc
We have audited the Group and Company financial statements (‘‘the financial statements’’) of C&C Group plc for the year ended
29 February 2012 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group and
Company Balance Sheets, the Group and Company Cash Flow Statements, the Group and Company Statements of Changes in
Equity, the Statement of Accounting Policies and the related notes. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the company’s members, as a body, in accordance with Section 193 of the Companies Act 1990.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
The Directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the EU are set out in the Statement of Directors’
Responsibilities on page 56.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view in accordance with IFRSs as adopted
by the EU, and have been properly prepared in accordance with the Companies Acts, 1963 to 2009 and, in the case of the Group
financial statements, Article 4 of the IAS Regulation. We also report to you our opinion as to: whether proper books of account
have been kept by the Company; whether at the balance sheet date, there exists a financial situation requiring the convening of
an extraordinary general meeting of the Company; and whether the information given in the Directors’ Report is consistent with
the financial statements. In addition, we state whether we have obtained all the information and explanations necessary for the
purposes of our audit, and whether the Company balance sheet is in agreement with the books of account.
We also report to you if, in our opinion, any information specified by law or the Listing Rules of the Irish Stock Exchange regarding
Directors’ remuneration and Directors’ transactions is not disclosed and, where practicable, include such information in our report.
We are required by law to report to you our opinion as to whether the description of the main features of the internal control and
risk management systems in relation to the process for preparing the consolidated Group financial statements, set out in the
annual Corporate Governance Statement, is consistent with the consolidated financial statements.
In addition, we review whether the Corporate Governance Statement reflects the Company’s compliance with the nine provisions
of the UK Corporate Governance Code and the two provisions of the Irish Corporate Governance Annex specified for our review
by the Listing Rules of the Irish Stock Exchange, and we report if it does not. We are not required to consider whether the board’s
statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate
governance procedures or its risk and control procedures.
We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial
statements. The other information comprises only the Directors’ Report, the Chairman’s Statement and the Finance Review. We
consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the
financial statements. Our responsibilities do not extend to any other information.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation
of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
5 7
INDEPENDENT AUDITOR’S REPORT - CONTINUED
to the members of C&C Group plc
OPINION
In our opinion:
• the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the
Group’s affairs as at 29 February 2012 and of its profit for the year then ended;
• the Company financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, as applied in
accordance with the provisions of the Companies Acts 1963 to 2009, of the state of the Company’s affairs as at 29 February 2012;
• the Group financial statements have been properly prepared in accordance with the Companies Acts 1963 to 2009 and Article 4
of the IAS Regulation; and
• the Company financial statements have been properly prepared in accordance with the Companies Acts 1963 to 2009.
OTHER MATTERS
We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion
proper books of account have been kept by the Company. The Company balance sheet is in agreement with the books of account.
In our opinion the information given in the directors’ report and the description in the annual Corporate Governance Statement of
the main features of the internal control and risk management systems in relation to the process for preparing the consolidated
Group financial statements, is consistent with the financial statements.
The net assets of the Company, as stated in the Company balance sheet, are more than half of the amount of its called-up share
capital and, in our opinion, on that basis there did not exist at 29 February 2012 a financial situation which under Section 40 (1) of
the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the Company.
Cliona Mullen, for and on behalf of
Chartered Accountants, Statutory Audit Firm
1 Stokes Place, St. Stephen’s Green, Dublin 2, Ireland
16 May 2012
5 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
GROUP INCOME STATEMENT
For the year ended 29 February 2012
Revenue
Excise duties
Net revenue
Operating costs
Operating profit
Finance income
Finance expense
Profit before tax
Income tax (expense)/credit
Profit from continuing operations
Discontinued operations
(Loss)/profit from discontinued operations
year ended 29 February 2012
year ended 28 February 2011
Before Exceptional
items
(note 5)
€m
exceptional
items
€m
Notes
exceptional
items
€m
Before Exceptional
items
(note 5)
€m
Total
€m
716.7
(235.9)
480.8
-
-
-
716.7
(235.9)
770.0
(260.1)
480.8
509.9
-
-
-
Total
€m
770.0
(260.1)
509.9
(369.6)
4.8
(364.8)
(409.0)
(12.0)
(421.0)
111.2
4.8
116.0
100.9
(12.0)
88.9
0.7
(5.8)
-
-
0.7
(5.8)
1.2
(10.6)
-
-
1.2
(10.6)
106.1
4.8
110.9
91.5
(12.0)
79.5
(13.8)
92.3
0.4
5.2
(13.4)
(11.2)
2.9
(8.3)
97.5
80.3
(9.1)
71.2
1
1
2
1
6
6
7
8
(0.1)
(1.7)
(1.8)
3.7
225.5
229.2
Profit for the year attributable to equity shareholders
92.2
3.5
95.7
84.0
216.4
300.4
Basic earnings per share (cent)
Diluted earnings per share (cent)
Continuing operations
Basic earnings per share (cent)
Diluted earnings per share (cent)
10
10
10
10
29.4c
28.7c
30.0c
29.2c
93.4c
91.0c
22.1c
21.6c
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
5 9
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 29 February 2012
Other comprehensive income and expense:
Exchange difference arising on the net investment in foreign operations
and net investment hedge
Foreign currency reserve recycled on disposal of Northern Ireland wholesale business
Net loss on revaluation of land and buildings
Net movement in cash flow hedging reserve
Deferred tax on cash flow hedges
Actuarial (loss)/gain on retirement benefit obligations
Deferred tax on actuarial loss on retirement benefit obligations
Net (loss)/income recognised directly within other comprehensive income
Profit for the year attributable to equity shareholders
Comprehensive income for the year attributable to equity shareholders
Notes
2012
€m
2011
€m
6
6, 8
12
6
6, 21
22
21
5.3
0.7
(1.7)
1.4
(0.1)
(19.0)
2.4
13.2
-
-
4.4
(0.5)
0.2
-
(11.0)
17.3
95.7
300.4
84.7
317.7
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
6 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
GROUP BALANCE SHEET
As at 29 February 2012
ASSETS
Non-current assets
Property, plant & equipment
Goodwill & intangible assets
Retirement benefit obligations
Deferred tax assets
Trade & other receivables
Current assets
Inventories
Trade & other receivables
Derivative financial assets
Cash & cash equivalents
TOTAL ASSETS
EQUITy
Equity share capital
Share premium
Other reserves
Treasury shares
Retained income
Total equity
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings
Derivative financial liabilities
Retirement benefit obligations
Provisions
Deferred tax liabilities
Current liabilities
Interest bearing loans & borrowings
Derivative financial liabilities
Trade & other payables
Provisions
Current tax liabilities
Total liabilities
TOTAL EQUITy & LIABILITIES
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
Notes
2012
€m
2011
€m
12
13
22
21
16
15
16
23
24
24
24
24
19
23
22
18
21
19
23
17
18
181.8
484.9
0.2
6.5
19.5
692.9
46.1
93.4
0.1
128.3
267.9
187.2
466.3
-
8.7
20.0
682.2
40.7
105.5
0.4
128.7
275.3
960.8
957.5
3.4
92.0
57.8
(16.8)
577.8
714.2
3.4
86.3
52.9
(17.4)
518.5
643.7
-
-
15.3
11.5
7.2
34.0
60.0
0.9
141.9
5.8
4.0
212.6
99.8
0.7
15.3
11.5
5.9
133.2
35.2
1.4
139.1
4.2
0.7
180.6
246.6
313.8
960.8
957.5
6 1
GROUP CASH FLOW STATEMENT
For the year ended 29 February 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year attributable to equity shareholders
Finance income
Finance expense
Income tax expense
Depreciation of property, plant & equipment
Amortisation of intangible assets
Profit on disposal of property, plant & equipment
Revaluation of property, plant & equipment
Loss/(profit) on disposal of businesses
Exceptional retirement benefit obligations gain re:discontinued operations
Charge for share-based employee benefits
Pension contributions paid less amount charged to income statement
(Increase)/ decrease in inventories
Decrease in trade & other receivables
Increase in trade & other payables
Decrease in provisions
Interest received
Interest and similar costs paid
Income taxes paid
Net cash inflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
Net proceeds on disposal of property, plant & equipment
Acquisition of brands/ deferred consideration paid
Proceeds on disposal of businesses
Net cash (outflow)/inflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of share options
Proceeds from exercise of Interests under Joint Share Ownership Plan
Repayment of debt
Dividends paid
Net cash outflow from financing activities
Net increase in cash & cash equivalents
Cash & cash equivalents at beginning of year
Translation adjustment
Cash & cash equivalents at end of year
A reconciliation of cash & cash equivalents to net debt is presented in note 20 to the financial statements.
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
6 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
2012
€m
2011
€m
95.7
(0.7)
5.8
13.4
20.2
0.1
(0.3)
2.0
1.8
(0.1)
2.6
(19.1)
121.4
(4.5)
10.6
1.2
(0.1)
128.6
0.7
(4.6)
(4.4)
300.4
(1.2)
10.6
8.8
21.2
0.1
-
-
(224.7)
(0.9)
4.0
(4.9)
113.4
8.8
9.0
15.4
(3.2)
143.4
1.2
(8.3)
(8.4)
120.3
127.9
(18.9)
1.2
(16.6)
4.7
(21.1)
-
(31.7)
294.9
(29.6)
242.1
1.5
0.1
(73.6)
(18.5)
1.2
3.6
(348.2)
(12.1)
(90.5)
(355.5)
0.2
128.7
(0.6)
14.5
113.5
0.7
128.3
128.7
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 29 February 2012
Equity
share
capital premium
€m
Capital
Share redemption
reserve
€m
€m
Cash flow
Share-
based Currency
hedging payments translation Revaluation
reserve
reserve
€m
€m
reserve
€m
reserve
€m
Capital
reserve
€m
Treasury Retained
income
€m
shares
€m
Total
€m
At 28 February 2010
3.3
77.1
0.5
24.9
(5.7)
4.8
2.7
5.9
(21.3)
237.2
329.4
Profit for the year attributed
to equity shareholders
Other comprehensive income
-
-
-
-
-
-
-
-
-
3.9
-
-
Total
3.3
77.1
0.5
24.9
(1.8)
4.8
-
13.2
15.9
-
-
-
-
300.4
0.2
5.9
(21.3)
537.8
300.4
17.3
647.1
Dividend on ordinary shares
Exercised share options
Reclassification of share-based
payments reserve
Joint Share Ownership Plan
Equity settled share-
based payments
-
0.1
8.1
1.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.9)
(0.4)
4.0
-
-
-
-
-
-
-
-
-
-
-
-
-
3.9
-
(20.2)
-
(12.1)
1.2
0.9
-
-
-
3.5
4.0
At 28 February 2011
3.4
86.3
0.5
24.9
(1.8)
7.5
15.9
5.9
(17.4)
518.5
643.7
Profit for the year attributed
to equity shareholders
Other comprehensive expense
-
-
-
-
-
-
-
-
-
1.3
-
-
-
6.0
Total
3.4
86.3
0.5
24.9
(0.5)
7.5
21.9
Dividend on ordinary shares
Exercised share options
Reclassification of share-based
payments reserve
Reclassification of revaluation
reserve on disposal
Joint Share Ownership Plan
Equity settled share-
based payments
-
-
-
-
-
-
4.2
1.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2.5)
-
(0.4)
2.6
-
-
-
-
-
-
-
(1.7)
4.2
-
-
95.7
(16.6)
95.7
(11.0)
(17.4)
597.6
728.4
-
-
-
(0.4)
-
-
-
-
-
-
0.6
-
(22.7)
-
(18.5)
1.5
2.5
0.4
-
-
-
-
0.2
2.6
At 29 February 2012
3.4
92.0
0.5
24.9
(0.5)
7.2
21.9
3.8
(16.8) 577.8
714.2
6 3
Notes
2012
€m
2011
€m
14
16
21
24
24
24
19
23
19
23
17
968.8
30.6
-
999.4
966.2
24.9
0.6
991.7
9.3
-
1,008.7
991.7
3.4
793.9
6.3
134.9
938.5
-
-
-
60.0
-
10.2
70.2
3.4
788.2
4.4
58.3
854.3
99.8
0.7
100.5
35.2
1.3
0.4
36.9
70.2
137.4
1,008.7
991.7
COMPANY BALANCE SHEET
As at 29 February 2012
ASSETS
Non-current assets
Financial assets
Trade & other receivables
Deferred tax asset
Current assets
Cash & cash equivalents
TOTAL ASSETS
EQUITy
Equity share capital
Share premium
Other reserves
Retained income
Total equity
LIABILITIES
Non-current liabilities
Interest bearing loans & borrowings
Derivative financial liabilities
Current liabilities
Interest bearing loans & borrowings
Derivative financial liabilities
Trade & other payables
Total liabilities
TOTAL EQUITy AND LIABILITIES
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
6 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
COMPANY CASH FLOW STATEMENT
For the year ended 29 February 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) for the year
Income tax expense
Finance income
Finance expense
Loss on retranslation of foreign currency bank borrowings
Decrease in other payables
Interest paid and similar costs
Net cash inflow/(outflow) from operating activities
CASH FLOWS FROM FINANCING ACTIVITIES
Movement in loans with subsidiary undertakings
Proceeds from exercise of share options
Bank loans repaid
Dividends paid
Net cash (outflow)/ inflow from financing activities
Net movement in cash & cash equivalents
Cash & cash equivalents at beginning of year
Cash & cash equivalents at end of year
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
2012
€m
2011
€m
96.8
0.4
(5.1)
4.4
(1.7)
94.8
(0.2)
(4.1)
(5.6)
7.6
(18.1)
9.3
2.8
(4.0)
-
(8.1)
90.5
(12.1)
9.4
1.5
(73.6)
(18.5)
371.2
1.2
(348.2)
(12.1)
(81.2)
12.1
9.3
-
9.3
-
-
-
6 5
Retained
income
€m
Total
€m
83.2
864.2
(5.6)
-
77.6
(20.2)
-
0.9
-
(5.6)
2.6
861.2
(12.1)
1.2
-
4.0
58.3
854.3
96.8
-
155.1
(22.7)
-
2.5
-
96.8
1.8
952.9
(18.5)
1.5
-
2.6
2.6
-
-
2.6
-
-
(0.9)
4.0
5.7
-
-
5.7
-
-
(2.5)
2.6
5.8
134.9
938.5
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 29 February 2012
Equity
share
capital
€m
Share redemption
reserve
€m
Capital Cash flow Share based
payment
hedging
reserve
reserve
€m
€m
premium
€m
Company
At 28 February 2010
Loss for the year attributable to equity shareholders
Other comprehensive income
Total
Dividend on ordinary shares
Exercised share options
Reclassification of share-based payments reserve
Equity settled share-based payments
At 28 February 2011
Profit for the year attributable to equity shareholders
Other comprehensive income
Total
Dividend on ordinary shares
Exercised share options
Reclassification of share-based payments reserve
Equity settled share-based payments
3.3
779.0
-
-
3.3
-
0.1
-
-
-
-
779.0
8.1
1.1
-
-
3.4
788.2
-
-
3.4
-
-
788.2
-
-
-
-
4.2
1.5
-
-
0.5
-
-
0.5
-
-
-
-
0.5
-
-
0.5
-
-
-
-
At 29 February 2012
3.4
793.9
0.5
(4.4)
-
2.6
(1.8)
-
-
-
-
(1.8)
-
1.8
-
-
-
-
-
-
On behalf of the Board
Sir B Stewart
Chairman
S Glancey
Group Chief Executive Officer
6 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
STATEMENT OF ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
C&C Group plc (the ‘Company’) is a company incorporated and tax resident in Ireland. The Group’s financial statements for
the year ended 29 February 2012 consolidate the individual financial statements of the Company and its subsidiaries (together
referred to as “the Group”).
The Company and Group financial statements, together the “financial statements”, were authorised for issue by the Directors on
16 May 2012.
The accounting policies applied in the preparation of the financial statements for the year ended 29 February 2012 are set out
below. These have been applied consistently for all periods presented in these financial statements and by all Group entities. As
outlined in note 8 the Group has applied discontinued accounting in relation to the current year disposal of the Group’s Northern
Ireland wholesaling business and the prior year disposal of the Group’s Spirits & Liqueurs business, (resulting in a revision to the
related comparatives).
STATEMENT OF COMPLIANCE
As required by European Union (EU) law, the Group financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the EU, which comprise standards and interpretations approved by the
International Accounting Standards Board (IASB). The individual financial statements of the Company have been prepared in
accordance with IFRSs as adopted by the EU, as applied in accordance with the Companies Acts 1963 to 2009 which permits a
Company that publishes its Company and Group financial statements together to take advantage of the exemption in section
148(8) of the Companies Act, 1963 from presenting its Company income statement which forms part of the approved Company
financial statements.
IFRSs as adopted by the EU applied by the Company and Group in the preparation of these financial statements are those that
were effective for accounting periods ending on or before 29 February 2012. The Group has adopted the following new and
amended IFRS and International Financial Reporting Interpretation Committee (IFRIC) Interpretations in respect of the financial
year ended 29 February 2012, none of which impacted the financial statements or performance of the Group in the period.
The IASB and IFRIC have issued the following Standards and Interpretations that are not yet effective for the Group (EU Endorsed)
and the financial impact is being considered by the Group:
•
•
•
•
•
•
•
•
IAS 32 Offsetting Financial Assets and Financial Liabilities with an effective date of 1 January 2014.
IFRS 9 Financial Instruments (IFRS 9 (2010)), with an effective date of 1 January 2015.
IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities
and IFRS 13 Fair Value Measurement, which all have an effective date of 1 January 2013.
IAS 27 Separate Financial Statements (2011), which supersedes IAS 27 (2008) and IAS 28 Investments in Associates and Joint
Ventures (2011), which supersedes IAS 28 (2008), which both have an effective date of 1 January 2013.
Presentation of Items of Other Comprehensive Income (Amendments to IAS 1 Presentation of Financial Statements), with an
effective date of 1 July 2012.
IAS 19 Employee Benefits which supersedes IAS 19 (1998), with an effective date of 1 January 2013.
Deferred Tax: Recovery of Underlying Assets – Amendments to IAS 12 (effective date 1 January 2012 but not yet adopted
by the EU).
IFRS 7 Financial Instruments disclosures – Offsetting Financial Assets and Financial Liabilities, with an effective date of
1 January 2013.
•
IFRS 7 Financial Instruments disclosures – Transfers of Financial Assets with an effective date for periods beginning 1 July 2011.
• Amendments to IAS 24 – Related Party Disclosures
•
Improvements to IFRSs (2010).
6 7
STATEMENT OF ACCOUNTING POLICIES - CONTINUED
BASIS OF PREPARATION
The Group and the individual financial statements of the Company are prepared on the historical cost basis except for the
measurement at fair value of share options at date of grant, derivative financial instruments, retirement benefit obligations and
the revaluation of certain items of property, plant & equipment. The accounting policies have been applied consistently by Group
entities and for all periods presented.
The financial statements are presented in euro millions to one decimal place.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain critical
accounting estimates. In addition, it requires management to exercise judgement in the process of applying the Group and
Company’s accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements relate primarily to:
• the determination of the fair value and the useful economic life of assets & liabilities, and intangible assets acquired on the
acquisition of a company or business (note 11)
• the determination of carrying value of land (note 12),
• the determination of carrying value or depreciated replacement cost, useful economic life and residual values in respect of the
Group’s buildings, plant & machinery (note 12),
• the determination of the Group’s income tax charge (note 7),
• the assessment of goodwill and intangible assets for impairment (note 13),
• accounting for retirement benefit obligations (note 22),
• the valuation and measurement of financial instruments (note 23),
• the valuation of share-based payments (note 4), and,
• the determination and valuation of provisions for future liabilities (note 18).
These are discussed in more detail in the accounting policies and/or notes to the financial statements as referenced above.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods.
BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and all subsidiaries. The financial year
ends of all entities in the Group are coterminous.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control over
the operating and financial decisions is obtained and cease to be consolidated from the date on which control is transferred out of
the Group. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of
an entity so as to obtain economic benefits from its activities.
On 30 April 2004, the Group, previously headed by C&C Group International Holdings Limited, underwent a re-organisation by
virtue of which C&C Group International Holdings Limited’s shareholders in their entirety exchanged their shares for shares in
C&C Group plc, a newly formed company, which then became the ultimate parent company of the Group. Notwithstanding the
change in the legal parent of the Group, this transaction has been accounted for as a reverse acquisition and the consolidated
financial statements are prepared on the basis of the new legal parent having been acquired by the existing Group.
All inter-company balances and transactions, including recognised gains arising from inter-group transactions, have been
eliminated in full. Unrealised losses are eliminated in the same manner as recognised gains except to the extent that they provide
evidence of impairment.
Company Financial Statements
Investments in subsidiaries are carried at cost less provision for impairment. Dividend income is recognised when the right to
receive payment is established.
6 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
REVENUE RECOGNITION
Revenue comprises the fair value of goods supplied to external customers exclusive of inter-company sales and value added
tax, after allowing for discounts, rebates, allowances for customer loyalty and other pricing related allowances and incentives.
Provision is made for returns where appropriate. Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group, that it can be reliably measured, and that the significant risks and rewards of ownership of the
goods have passed to the buyer. This is deemed to occur on delivery.
EXCISE DUTy
Excise duty is levied at the point of production in the case of the Group’s manufactured products and at the point of importation
in the case of imported products in the relevant jurisdictions in which the Group operates. As the Group’s manufacturing and
warehousing facilities are Revenue approved and registered excise facilities, the excise duty liability generally crystallises on
transfer of product from duty in suspense to duty paid status which normally coincides with the point of sale.
NET REVENUE
Net revenue is defined by the Group as Revenue less Excise duty. Excise duties which represent a significant proportion of
Revenue, are set by external regulators over which the Group has no control and are generally passed on to the consumer,
consequently the Directors consider that the disclosure of Net revenue enhances the transparency and provides a more
meaningful analysis of underlying sales performance.
EXCEPTIONAL ITEMS
The Group has adopted an accounting policy and income statement format that seeks to highlight significant items of income
and expense within Group results for the year. The Directors believe that this presentation provides a more helpful analysis.
Such items may include significant restructuring costs, past service and curtailment gains/costs realised under the Group’s
defined benefit pension schemes, profits or losses on disposal or termination of operations, litigation costs and settlements,
profit or loss on disposal of investments, significant impairment of assets and unforeseen gains/losses arising on derivative
financial instruments. The Directors use judgement in assessing the particular items which by virtue of their scale and nature are
disclosed in the income statement and related notes as exceptional items.
FINANCE INCOME AND EXPENSES
Finance income comprises interest income on funds invested, gains on hedging instruments that are recognised in the income
statement and interest earned on customer advances. Interest income is recognised as it accrues in the income statement, using
the effective interest method.
Finance expenses comprise interest expense on borrowings, amortisation of borrowing issue costs, changes in the fair value of
financial assets or liabilities which are accounted for at fair value through the income statement, losses on hedging instruments
that are recognised in the income statement, gains or losses relating to the effective portion of interest rate swaps hedging
variable rate borrowings, ineffective portion of changes in the fair value of cash flow hedges, impairment losses recognised on
financial assets and unwinding the discount on provisions. All borrowing costs are recognised in the income statement using the
effective interest method.
RESEARCH AND DEVELOPMENT
Expenditure on research that is not related to specific product development is recognised in the income statement as incurred.
Expenditure on the development of new or substantially improved products or processes is capitalised if the product or process is
technically feasible and commercially viable.
GOVERNMENT GRANTS
Grants are recognised at their fair value when there is a reasonable assurance that the grant will be received and all attaching
conditions have been complied with.
Capital grants received and receivable by the Group are credited to government grants and are amortised to the income
statement on a straight line basis over the expected useful lives of the assets to which they relate.
Revenue grants are recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it
is intended to compensate.
6 9
STATEMENT OF ACCOUNTING POLICIES - CONTINUED
DISCONTINUED OPERATIONS
A discontinued operation is a component of the Group’s business that represents a separate major line of business, geographical
area of operations or is material to Revenue, Net revenue or Operating profit and has been disposed of or is held for sale. When
an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation had been
discontinued from the start of the earliest period presented.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal organisational and management structure of the
Group and the internal financial information provided to the Chief Operating Decision-Maker (considered to be the executive
management team) who is responsible for the allocation of resources and the monitoring and assessment of performance of
each of the operating segments. The Group has determined that it has six reportable operating segments.
The analysis by segment includes both items directly attributable to a segment and those, including central overheads that are
allocated on a reasonable basis to those segments in internal financial reporting packages.
FOREIGN CURRENCy TRANSLATION
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in euro,
which is the presentation currency of the Group and both the presentation and functional currency of the Company.
Transactions in foreign currencies are translated into the functional currency of each entity at the foreign exchange rate ruling
at the date of the transaction. Non-monetary assets carried at historic cost are not subsequently retranslated. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are translated into functional currencies at the foreign
exchange rate ruling at that date. Foreign exchange movements arising on translation are recognised in the income statement
with the exception of all monetary items designated as a hedge of a net investment in a foreign operation which are recognised in
the consolidated financial statements, in other comprehensive income until the disposal of the net investment, at which time they
are recognised in the income statement for the year.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are
translated to euro at the foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign
operations are translated to euro at the average exchange rate for the financial period where that represents a reasonable
approximation of actual rates. Foreign exchange movements arising on translation of the net investment in a foreign operation,
including those arising on long term intra group loans for which settlement is neither planned nor likely to happen in the
foreseeable future and as a consequence are deemed quasi equity in nature, are recognised directly in other comprehensive
income in the consolidated financial statements in the foreign currency translation reserve through the statement of
comprehensive income. The portion of exchange gains or losses on foreign currency borrowings or derivatives used to provide a
hedge against a net investment in a foreign operation that is designated as a hedge of those investments, is recognised directly
in other comprehensive income to the extent that they are determined to be effective. The ineffective portion is recognised
immediately in the income statement for the year.
Any movements that have arisen since 1 March 2004, the date of transition to IFRS, are recognised in the currency translation
reserve and are recycled through the income statement on disposal of the related business. Translation differences that arose before
the date of transition to IFRS as adopted by the EU in respect of all non-euro denominated operations are not presented separately.
BUSINESS COMBINATIONS
The purchase method of accounting is employed in accounting for the acquisition of subsidiaries by the Group. The cost of a
business combination is measured as the aggregate of the fair value at the date of exchange of assets acquired and liabilities
incurred or assumed in exchange for control together with directly attributable acquisition costs. Where a business combination
agreement provides for an adjustment to the cost of the combination contingent on future events, the amount of the estimated
adjustment is included in the cost at the acquisition date to the extent that it can be reliably measured. To the extent that settlement
of all or any part of a business combination is deferred, the fair value of the deferred component is determined through discounting
the amounts payable to their present value at the date of exchange. The discount component is unwound as an interest charge in the
income statement over the life of the obligation.
Under IFRS 3 (2008) Business Combinations the identifiable assets and liabilities acquired in a business combination, are
measured at their provisional fair values at the date of acquisition and adjustments to the provisional values are made within
twelve months of the acquisition date and reflected as a restatement of the acquisition balance sheet if they are material;
otherwise they are recorded in the year in which they occur.
7 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
GOODWILL
The Group adopted IFRS 3 (2008) Business Combinations in the FY2011. However, the valuation of goodwill arising on the
acquisition of the Tennent’s and Gaymer businesses during the financial year ended 28 February 2010 did not come under the
scope of this revised standard and consequently were valued using IFRS 3 (2004) Business Combinations .
Goodwill is the excess of the consideration paid over the fair value of the identifiable assets, liabilities and contingent liabilities
in a business combination and relates to the future economic benefits arising from assets, which are not capable of being
individually identified and separately recognised.
Goodwill arising on acquisitions prior to the date of transition to IFRS as adopted by the EU has been retained, with the previous Irish
GAAP amount considered its deemed cost, subject to being tested for impairment. Goodwill written off to reserves under Irish GAAP
prior to 1998 has not been reinstated and will not be included in determining any subsequent profit or loss on disposal.
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the net fair
value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less
any accumulated impairment losses. Goodwill is not amortised but is reviewed for impairment annually or more frequently if
events or changes in circumstances indicate that the carrying value may be impaired.
As at the date of acquisition any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the
combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which
the goodwill relates. The cash generating units represent the lowest level within the Group at which goodwill is monitored for
internal management purposes and these units are not larger than the operating segments determined in accordance with IFRS
8 Operating Segments.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the
operation disposed of and the proportion of the cash-generating unit retained.
INTANGIBLE ASSETS (OTHER THAN GOODWILL) ARISING ON BUSINESS COMBINATIONS
An intangible asset, which is a non-monetary asset without a physical substance, is capitalised separately from goodwill as
part of a business combination at cost (fair value at date of acquisition) to the extent that it is probable that the expected future
economic benefits attributable to the asset will flow to the Group and that its fair value can be reliably measured. Acquired brands
and other intangible assets are deemed to be identifiable and recognised when they are controlled through contractual or other
legal rights, or are separable from the rest of the business, regardless of whether those rights are transferable or separable from
the Group or from other rights and obligations.
Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses. The carrying value of intangible assets considered to have an indefinite useful economic life are reviewed for
indicators of impairment at each reporting date and are subject to impairment testing when events or changes in circumstances
indicate that the carrying values may not be recoverable.
The amortisation charge on intangible assets considered to have finite lives is calculated to write-off the book value of the asset
over its useful life on a straight line basis on the assumption of zero residual value.
PROPERTy, PLANT & EQUIPMENT
Property (comprising land and buildings) is recognised at estimated fair value with the changes in the value of the property
reflected in other comprehensive income to the extent it does not reverse previously recognised losses or as an impairment
loss in the income statement to the extent it does not reverse previously recognised revaluation gains. The fair value is based on
estimated market value at the valuation date, being the estimated amount for which a property could be exchanged in an arms
length transaction, to the extent that an active market exists. Such valuations are determined based on benchmarking against
comparable transactions for similar properties in similar locations as those of the Group or on the use of valuation techniques
including the use of market yields on comparable properties. If no active market exists fair value may be determined using a
Depreciated Replacement Cost approach.
Plant & machinery is carried at its revalued amount. In view of the specialised nature of the Group’s plant & machinery and the
lack of comparable market-based evidence of similar plant sold as a ‘going concern’ i.e. as part of a continuing business, upon
which to base a market approach of fair value, the Group uses a Depreciated Replacement Cost approach to determine a fair
value for such assets.
7 1
STATEMENT OF ACCOUNTING POLICIES - CONTINUED
PROPERTy, PLANT & EQUIPMENT - CONTINUED
Depreciated Replacement Cost is assessed, firstly, by the identification of the gross replacement cost for each class of plant &
machinery. A depreciation factor derived from both the physical and functional obsolescence of each class of asset, taking into
account estimated residual values at the end of the life of each class of asset, is then applied to the gross replacement cost to
determine the net replacement cost. An economic obsolescence factor, which is derived based on current and anticipated capacity
or utilisation of each class of plant & machinery as a function of total available production capacity, is applied to determine the
Depreciated Replacement Cost.
Motor vehicles & other equipment are stated at cost less accumulated depreciation and impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. When parts of an item of property, plant
& equipment have different useful lives, they are accounted for as separate items (major components) of property, plant &
equipment. Subsequent costs are included in an asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group.
Property, plant & equipment, other than freehold land and assets under construction which are not depreciated, were
depreciated using the following rates which are calculated to write-off the value of the asset, less the estimated residual value,
over its expected useful life:
Buildings
Motor vehicles
Other equipment incl returnable bottles, cases and kegs
Plant & machinery
Storage tanks
2% straight line
15% straight line
5-25% straight line
15-30% reducing balance
10% reducing balance
The residual value and useful lives of property, plant & equipment are reviewed and adjusted if appropriate at each balance
sheet date to take account of any changes that could affect prospective depreciation charges and asset carrying values. When
determining useful economic lives, the principal factors the Group takes into account are the intensity at which the assets are
expected to be used, expected requirements for the equipment and technological developments.
On disposal of property, plant & equipment the cost or valuation and related accumulated depreciation and impairments are
removed from the balance sheet and the net amount, less any proceeds, is taken to the income statement and any amounts
included within the revaluation reserve transferred to the retained income reserve.
The carrying amounts of the Group’s property, plant & equipment are reviewed at each balance sheet date to determine whether
there is any indication of impairment. An impairment loss is recognised when the carrying amount of an asset or its cash
generation unit exceeds its recoverable amount (being the greater of fair value less costs to sell and value in use). Impairment
losses are debited directly to equity under the heading of revaluation reserve to the extent of any credit balance existing in the
revaluation reserve account in respect of that asset with the remaining balance recognised in the income statement.
A revaluation surplus is credited directly to other comprehensive income and accumulated in equity under the heading of
revaluation reserve, unless it reverses a revaluation decrease on the same asset previously recognised as an expense, where it is
first credited to the income statement to the extent of the previous write down.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost includes all expenditure incurred in acquiring the
inventories and bringing them to their present location and condition and is based on the first-in first-out principle.
In the case of finished goods and work in progress, cost includes direct production costs and the appropriate share of production
overheads plus excise duties, where appropriate. Net realisable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and estimated costs necessary to complete the sale.
Provision is made for slow-moving or obsolete stock where appropriate.
7 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
PROVISIONS
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured
at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted
to present value at an appropriate rate if the effect of the time value of money is deemed material. The carrying amount of the
provision increases in each period to reflect the passage of time and the unwinding of the discount and increase in the provision
due to the passage of time is recognised in the income statement within finance expense.
A contingent liability is not recognised but is disclosed where the existence of the obligation will only be confirmed by future
events or where it is not probable that an outflow of resources will be required to settle the obligation or where the amount of the
obligation cannot be measured with reasonable reliability. Contingent assets are not recognised but are disclosed where an inflow
of economic benefits is probable. Provisions are not recognised for future operating losses, however, provisions are recognised
for onerous contracts where the unavoidable cost exceeds the expected benefit.
Due to the inherent uncertainty with respect to such matters, the value of each provision is based on the best information
available at the time, including advice obtained from third party experts, and is reviewed by the Directors on a periodic basis with
the potential financial exposure reassessed. Revisions to the valuation of a provision are recognised in the period in which such a
determination is made and such revisions could have a material impact on the financial performance of the Group.
LEASES
Where the Group has entered into lease arrangements on land & buildings the lease payments are allocated between land &
buildings and each component is assessed separately to determine whether it is a finance or operating lease.
Finance leases, which transfer to the Group substantially all the risks and rewards of ownership of the leased asset, are
recognised in property, plant & equipment at the inception of the lease at the fair value of the leased asset or, if lower, the
present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation. Lease payments are apportioned between finance charges and a reduction of the lease obligation so
as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income
statement as part of finance expense.
Leases where the lessor retains substantially all the risks and benefits of ownership of the assets are classified as operating leases.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
RETIREMENT BENEFIT OBLIGATIONS
The Group operates a number of defined contribution and defined benefit pension schemes.
Obligations to the defined contribution pension schemes are recognised as an expense in the income statement as the related
employee service is received. Under these schemes, the Group has no obligation, either legal or constructive, to pay further
contributions in the event that the fund does not hold sufficient assets to meet its benefit commitments.
The liabilities and costs associated with the Group’s defined benefit pension schemes, all of which are funded and administered
under trusts which are separate from the Group, are assessed on the basis of the projected unit credit method by professionally
qualified actuaries and are arrived at using actuarial assumptions based on market expectations at the balance sheet date. The
discount rates employed in determining the present value of the schemes’ liabilities are determined by reference to market
yields, at the balance sheet date, on high-quality corporate bonds of a currency and term consistent with the currency and term
of the associated post-employment benefit obligations. The fair value of scheme assets is based on market price information,
measured at bid value for publicly quoted securities.
The resultant defined benefit pension net surplus or deficit is shown within either non-current assets or non-current liabilities
on the face of the Group balance sheet and comprises the total for each plan of the present value of the defined benefit obligation
less the fair value of plan assets out of which the obligations are to be settled directly. The assumptions (disclosed in note 22)
underlying these valuations are updated at each reporting period date based on current economic conditions and expectations
(return on plan assets, changes to strategic asset allocations to investment types, salary inflation and mortality rates) and reflect
any changes to the terms and conditions of the post retirement pension plans. The deferred tax liabilities and assets arising on
pension scheme surpluses and deficits are disclosed separately within deferred tax assets or liabilities, as appropriate.
When the benefits of a defined benefit scheme are improved, the portion of the increased benefit relating to the past service of
employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits
become vested. To the extent that the enhanced benefits vest immediately, the related expense is recognised immediately in the
income statement.
7 3
STATEMENT OF ACCOUNTING POLICIES - CONTINUED
RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
The expected increase in the present value of scheme liabilities arising from employee service in the current or prior periods is
recognised in arriving at operating profit or loss together with the expected returns on the scheme assets and the increase during
the period in the present value of the scheme liabilities arising from the passage of time. Differences between the expected and
the actual return on plan assets, experience gains and losses on scheme liabilities, together with the effect of changes in the
current or prior assumptions underlying the liabilities are recognised in other comprehensive income. The amounts recognised
in the Income statement and Statement of other comprehensive income and the valuation of the defined benefit pension net
surplus or deficit are sensitive to the assumptions used. While management believe that the assumptions used are appropriate
differences in actual experience or changes in assumptions may affect the valuation of retirement benefit obligations and
expenses recognised in future accounting periods.
Company
The Company has no direct employees and is not the sponsoring employer for any of the Group’s defined benefit pension
schemes. There is no stated policy within the Group in relation to the obligations of Group companies to contribute to scheme
deficits. Group companies make contributions to the schemes as requested by the sponsoring employers.
SHARE-BASED PAyMENTS
The Group operates a number of Share Option Schemes and Performance Share Plans, listed below, all of which are equity
settled share based payments as defined in IFRS 2 Share-Based Payment:-
• Executive Share Option Scheme (the ‘ESOS’),
• Long Term Incentive Plan (Part I) (the ‘LTIP (Part I)’),
• Joint Share Ownership Plan (the “JSOP”),
• Restricted Share Award Scheme,
• Recruitment and Retention Plan, and,
• Long Term Incentive Plan (Part II) (the ‘LTIP (Part II)’).
• Partnership and Matching Share Schemes
Equity settled share-based payment transactions
Group share schemes allow certain employees to acquire shares in the Company. The fair value of share entitlements granted is
recognised as an employee expense in the income statement with a corresponding increase in equity, while the cost of acquiring
shares on the open market to satisfy the Group’s obligations under the Partnership and Matching Share Schemes is recognised
in the income statement.
To date, share options granted by the Company under the ESOS and share entitlements (represented by nil-cost options) granted
under the Recruitment and Retention Plan and the LTIP (Part II) are subject to non-market vesting conditions only.
A percentage of the share entitlements (represented by nil-cost options) granted by the Company under the LTIP (Part I) and a
percentage of the shares granted under the Joint Share Ownership Plan and the Restricted Share Award scheme are subject
to both market and non-market vesting conditions whilst the remainder are subject to non-market vesting conditions only, the
details of which are set out in note 4. Market conditions are incorporated into the calculation of fair value of share entitlements as
at grant date. Non-market vesting conditions are not taken into account when estimating such fair value.
The expense for the share entitlements shown in the income statement is based on the fair value of the total number of
entitlements expected to vest and is allocated to accounting periods on a straight line basis over the vesting period. The
cumulative charge to the income statement at each reporting date reflects the extent to which the vesting period has expired and
the Group’s best estimate of the number of equity instruments that will ultimately vest. It is reversed only where entitlements
do not vest because all non-market performance conditions have not been met or where an employee in receipt of share
entitlements leaves the Group before the end of the vesting period and those options forfeit in consequence i.e. awards are
treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or
service conditions are satisfied. No reversal is recorded for failure to vest as a result of market conditions not being met.
The proceeds received by the Company net of any directly attributable transaction costs on the vesting of share entitlements are
credited to share capital and share premium when the share entitlements are exercised. Amounts included in the share-based
payments reserve are transferred to retained income when vested options are exercised, forfeited post vesting or lapse.
The dilutive effect of outstanding options is reflected as additional share dilution in the determination of diluted earnings per share.
The Group has no exposure in respect of cash-settled share-based payment transactions and share-based payment transactions
with cash alternatives as defined by IFRS 2 Share-Based Payment.
7 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
INCOME TAX
Current tax
Current tax expense represents the expected tax amount to be paid in respect of taxable income for the current year and is based on
reported profit and the expected statutory tax rates, reliefs and allowances applicable in the jurisdictions in which the Group operates.
Current tax for the current and prior years, to the extent that it is unpaid, is recognised as a liability in the balance sheet. The Group is
subject to corporate tax in a number of jurisdictions, and judgement is required in determining the worldwide provision for taxes. There
are many transactions and calculations during the ordinary course of business, for which the ultimate tax determination is uncertain
and the complexitiy of the tax treatment may be such that the final tax charge may not be determined until a formal resolution has
been reached with the relevant tax authority which may take several years to conclude. The ultimate tax charge may, therefore be
different from that which initially is reflected in the Group’s consolidated tax charge and provision any such differences could have
a material impact on the Group’s income tax charge and consequently financial performance. The determination of the provision
for income tax is based on managment’s understanding of the relevant tax law and judgement as to the appropriate tax charge, and
management believe that all assumptions and estimates used are reasonable and reflective of the tax legislation in jurisdictions in
which the Group operates. Where the final tax charge is different from the amounts that were initially recorded, such differences are
recognised in the income tax provision in the period in which such determination is made.
Deferred tax
Deferred tax is provided on the basis of the balance sheet liability method on all temporary differences at the balance sheet date.
Temporary differences are defined as the difference between the tax bases of assets and liabilities and their carrying amounts in
the financial statements. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
in which the asset is recognised or the liability is settled based on tax rates and tax laws that have been enacted or substantively
enacted at the balance sheet date.
Deferred tax assets and liabilities are recognised for all temporary differences except where they arise from:-
• the initial recognition of goodwill or the initial recognition of an asset or a liability in a transaction that is not a business
combination and affects neither the accounting profit or loss nor the taxable profit or loss at the time of the transaction, or,
• temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary difference is
subject to the Group’s control and it is probable that a reversal will not be recognised in the foreseeable future.
Deferred tax assets in respect of deductible temporary differences are recognised only to the extent that it is probable that taxable
profits or taxable temporary differences will be available against which to offset these items. The recognition of deferred tax assets is
based on management’s judgement and estimate of the most probable amount of future taxable profits, using assumptions consistent
with those employed in impairment calculations, and taking into consideration applicable tax legislation in the relevant jurisdiction.
The carrying amounts of deferred tax assets are subject to review at each balance sheet date and are reduced to the extent that future
taxable profits are considered to be insufficient to allow all or part of the deferred tax asset to be utilised.
Deferred tax and current tax are recognised as a component of the tax expense in the income statement except to the extent that
they relate to items recognised directly in other comprehensive income (for example, certain derivative financial instruments
and actuarial gains and losses on defined benefit pension schemes), in which case the related tax is also recognised in other
comprehensive income.
FINANCIAL INSTRUMENTS
Trade & other receivables
Trade receivables are initially recognised at fair value (which usually equals the original invoice value) and are subsequently measured
at amortised cost. A provision for impairment of trade receivables is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference
between the asset’s carrying amount and the present value of estimated future cash flows. Movements in provisions are recognised in
the income statement. Bad debts are written-off against the provision when no further prospect of collection exists.
Advances to customers
Advances to customers, which can be categorised as either an advance of discount or a repayment/annuity loan conditional
on the achievement of contractual sales targets, are initially recognised at fair value, amortised to the income statement (and
classified within sales discounts as a reduction in revenue) over the relevant period to which the customer commitment is made,
and subsequently carried at amortised cost less an impairment allowance. Where there is a volume target the amortisation of the
advance is included in sales discounts as a reduction to revenue. A provision for impairment is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the agreement with the
customer. The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated
future cash flows or recognition of the amortisation of advances.
7 5
STATEMENT OF ACCOUNTING POLICIES - CONTINUED
FINANCIAL INSTRUMENTS - CONTINUED
Cash & cash equivalents
Cash & cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with an original
maturity of three months or less. Bank overdrafts that are repayable on demand and form part of the Group’s cash management
are included as a component of cash & cash equivalents for the purpose of the statement of cash flows.
Trade & other payables
Trade & other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest rate method, unless the maturity date is less than six months.
Interest-bearing loans & borrowings
Interest-bearing loans & borrowings are recognised initially at fair value less attributable transaction costs and are subsequently
measured at amortised cost with any difference between the amount originally recognised and redemption value being
recognised in the income statement over the period of the borrowings on an effective interest rate basis. Where the early
refinancing of a loan results in a significant change in the present value of the expected cash flows, the original loan is de-
recognised and the replacement loan is recognised at fair value.
Derivative financial instruments
The Group uses derivative financial instruments (principally interest rate swaps and forward foreign exchange contracts) to hedge
its exposure to interest rate and foreign exchange risks arising from operational and financing activities. The Group does not
enter into speculative transactions.
Derivative financial instruments are measured at fair value at each reporting date. The fair value of interest rate swaps
is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date, taking into
account current market interest and currency exchange rates where relevant and the current creditworthiness of the swap
counterparties. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity and credit profiles and equates to the market price at the balance sheet date.
Gains or losses on re-measurement to fair value are recognised immediately in the income statement except where derivatives
are designated and qualify for cashflow hedge accounting in which case recognition of any resultant gain or loss is recognised
through other comprehensive income.
Derivative financial instruments entered into by the Group are for the purposes of hedge accounting classified as cash flow
hedges which hedge exposure to fluctuations in future cash flows derived from a particular risk associated with a recognised
asset, liability, a firm commitment or a highly probable forecast transaction.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as
well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash flows of hedged items.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised liability, a firm
commitment or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument
is recognised as a separate component of other comprehensive income with the ineffective portion being reported in the income
statement. The associated gains or losses that had previously been recognised in other comprehensive income are transferred to
the income statement contemporaneously with the materialisation of the hedged transaction, except when a firm commitment or
forecast transaction results in the recognition of a non-financial asset or a non-financial liability, in which case the cumulative gain
or loss is removed from other comprehensive income and included in the initial measurement of the asset or liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, is terminated or exercised, or no longer
qualifies for hedge accounting. For situations where the hedging instrument no longer qualifies for hedge accounting, if the
hedged transaction is still probable, any cumulative gain or loss on the hedging instrument recognised as a separate component
of other comprehensive income is kept in other comprehensive income until the forecast transaction occurs with future changes
in fair value recognised in the income statement. If a hedged transaction is no longer expected to occur, the net cumulative gain
or loss recognised in other comprehensive income is transferred to the income statement in the period.
7 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
FINANCIAL INSTRUMENTS - CONTINUED
Net investment hedging
Any gain or loss on the effective portion of a hedge of a net investment in a foreign operation using a foreign currency
denominated monetary liability is recognised in other comprehensive income while the gain or loss on the ineffective portion
is recognised immediately in the income statement. Cumulative gains and losses remain in other comprehensive income until
disposal of the net investment in the foreign operation at which point the related differences are transferred to the income
statement as part of the overall gain or loss on disposal.
SHARE CAPITAL/PREMIUM
Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issuance of new shares are
shown in equity as a deduction from the gross proceeds.
Treasury shares
Where the Company issues equity share capital under its Joint Share Ownership Plan, which is held in trust by an Employee
Benefit Trust, these shares are classified as treasury shares on consolidation until such time as the Interests vest and the
participants acquire the shares from the Trust or the Interests lapse and the shares are cancelled or disposed of by the Trust.
Own shares acquired under share buyback programme
The cost of ordinary shares purchased by the Company on the open market is recorded as a deduction from equity on the face
of the Group and Company balance sheet when these shares are cancelled. An amount equal to the nominal value of any shares
cancelled is included within the capital redemption reserve fund and the excess of cost over nominal value is deducted from
retained earnings.
Dividends
Final dividends on ordinary shares are recognised as a liability in the financial statements only after they have been approved at
an annual general meeting of the Company. Interim dividends on ordinary shares are recognised when they are paid.
COMPANy FINANCIAL ASSETS
The change in legal parent of the Group on 30 April 2004, as disclosed in detail in that year’s annual report, was accounted for
as a reverse acquisition. This transaction gave rise to a financial asset in the Company’s accounts, which relates to the fair value
at that date of its investment in subsidiaries. Financial assets are reviewed for impairment if there are any indications that the
carrying value may not be recoverable.
Share options granted to employees of subsidiary companies are accounted for as an increase in the carrying value of the
investment in subsidiaries and the share-based payment reserve.
7 7
NOTES
Forming part of the financial statements
1. SEGMENTAL REPORTING
The Group’s business activity is the manufacturing, marketing and distribution of alcoholic drinks and six operating segments
have been identified; Cider Republic of Ireland (‘ROI’), Cider Great Britain (‘GB’), Cider Northern Ireland (‘NI’), Cider Export,
Tennent’s (previously, Tennent’s GB and Tennent’s Ireland) and Third Party Brands . The basis of segmentation differs from
that presented in the prior year in that Tennent’s GB and Tennent’s Ireland are now considered a single reportable segment.
The prior year results for the reportable segments, Cider GB and Cider Export, have also been restated following more detailed
information becoming available on transfer of the Gaymers Cider business off a Transitional Services Arrangement with
Constellation Europe. The financial results from the sale of the Gaymers cider brands to territories outside of Great Britain are
now correctly classified within Cider Export whereas previously these had been classified as Cider GB.
The basis of segmentation corresponds with the Group’s organisation structure, the current year nature of reporting lines
to the Chief Operating Decision-Maker (as defined in IFRS 8 Operating Segments) and the Group’s current year internal
reporting for the purposes of managing the business, assessing performance and allocating resources. All comparative
amounts have been restated to reflect the new basis of segmentation.
The Chief Operating Decision-Maker, identified as the executive committee comprising John Dunsmore (resigned from the
executive committee on 31 December 2011 and from the Board on 29 February 2012), Stephen Glancey and Kenny Neison,
assesses and monitors the operating results of segments separately via internal management reports in order to effectively
manage the business. Segment performance is predominantly evaluated based on Revenue, Net revenue and Operating
profit before exceptional items and therefore these are the most relevant indicators in evaluating the results of the Group’s
operating segments. Given that net finance costs and income tax are managed on a centralised basis, these items are not
allocated between operating segments for the purposes of the information presented to the Chief Operating Decision-Maker
and are accordingly omitted from the detailed segmental analysis below.
The identified business segments are as follows:-
(i) Cider ROI
This segment includes the results from sale of the Group’s cider products in the Republic of Ireland, principally Bulmers.
(ii) Cider GB
This segment includes the results from sale of the Group’s cider products in Great Britain, with Magners, Blackthorn,
Olde English and Gaymers the principal brands.
(iii) Cider NI
This segment includes the results from sale of the Group’s cider products in Northern Ireland, with Magners the principal
brand.
(iv) Cider Export
This segment includes the results from sale of the Group’s cider products, with Magners, Blackthorn and Hornsby’s the
principal brands, in all territories outside of the Republic of Ireland, Northern Ireland and Great Britain.
(v) Tennent’s
This segment includes the results from sale of the Group’s ‘owned’ beer brand - Tennent’s.
(vi) Third Party Brands
This segment relates to the distribution of agency products, including AB InBev brands in the Republic of Ireland,
Northern Ireland and Scotland.
Information regarding the results of each reportable segment is disclosed below for the Group’s continuing business while
the relevant information in relation to the Group’s discontinued Northern Ireland wholesaling business which was previously
reported within Third Party Brands (disposed 30 June 2011) and the Spirits & Liqueurs business (disposed 30 June 2010), is
set out in note 8.
The analysis by segment includes both items directly attributable to a segment and those, including central overheads, which
are allocated on a reasonable basis in presenting information to the Chief Operating Decision-Maker.
Inter-segment revenue is not material and thus not subject to separate disclosure.
Segment capital expenditure is the total amount incurred during the year to acquire segment assets, excluding those assets
acquired in business combinations that are expected to be used for more than one accounting period.
7 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
1. SEGMENTAL REPORTING - CONTINUED
(a) Operating segment disclosures
Cider – ROI
Cider – GB
Cider – NI
Cider – Export
Tennent’s
Third party brands
Continuing operations
Discontinued operations (note 8)
2012
2011
{restated}
Revenue
€m
Net
revenue
€m
Operating
profit
€m
Revenue
€m
Net Operating
profit
€m
revenue
€m
126.8
249.8
15.1
30.3
216.8
77.9
716.7
5.2
91.5
172.8
12.2
30.2
100.1
74.0
480.8
5.2
42.2
29.5
3.5
6.6
22.3
7.1
136.4
281.6
15.7
24.5
227.2
84.6
111.2
(0.1)
770.0
40.6
100.0
192.2
12.6
24.5
103.5
77.1
509.9
40.6
43.7
25.6
3.1
4.1
18.5
5.9
100.9
4.1
Total before unallocated items
721.9
486.0
111.1
810.6
550.5
105.0
Unallocated items:
Exceptional items (note 5)
Total
-
-
4.9*
-
-
(11.1)**
721.9
486.0
116.0
810.6
550.5
93.9
*
Of the exceptional items in the current year, €4.8m relates to Cider ROI, €0.7m to Cider GB, €0.7m to Cider NI, €1.3m
to Cider Export, a (€2.7m) loss to Tennent’s and a €0.1m income to discontinued operations.
** Of the exceptional items in the prior year, (€0.9m) relates to Cider ROI, (€6.8m) to Cider GB, (€0.4m) to Cider NI, (€0.2m)
to Cider Export, (€3.7m) to Tennent’s, and a €0.9m income to discontinued operations.
The unallocated exceptional items exclude the loss on disposal of discontinued activities of €1.1m (FY2011: €224.7m profit)
and a loss of €0.7m on the recycling of a foreign currency reserve to the income statement following the disposal of the
Group’s NI wholesaling business.
The impact of the reclassification of the financial results from the sale of the Gaymers cider brands to territories outside of
GB from Cider GB to Cider Export are outlined below. This reclassification has no impact on the Revenue, Net revenue or
Operating profit reported by the Group:-
Cider – GB
Previously reported
Impact of change
Current classification
Cider – Export
Previously reported
Impact of change
Current classification
Revenue Net revenue
€m
€m
Operating
profit
€m
284.6
(3.0)
195.2
(3.0)
27.0
(1.4)
281.6
192.2
25.6
21.5
3.0
21.5
3.0
24.5
24.5
2.7
1.4
4.1
7 9
NOTES - CONTINUED
Forming part of the financial statements
1. SEGMENTAL REPORTING - CONTINUED
(b) Other operating segment information
2012
Capital
2011
Capital
expenditure Depreciation expenditure Depreciation
€m
€m
€m
€m
Cider – ROI
Cider – GB
Cider – NI
Cider – Export
Tennent’s
Third party brands
Total – continuing operations
Discontinued operations
Total
1.2
8.7
0.1
0.6
7.6
0.4
18.6
3.6
8.1
0.2
0.6
7.4
0.3
20.2
1.7
5.2
0.1
-
12.2
-
19.2
-
-
-
4.6
8.9
0.3
0.4
6.8
0.1
21.1
0.1
18.6
20.2
19.2
21.2
(c) Geographical analysis of revenue, net revenue and non-current assets
ROI
UK
Rest of Europe
North America
Rest of world
Total
Revenue
Net revenue
2012
€m
142.5
543.6
10.4
14.4
5.8
2011
€m
151.4
597.1
6.5
8.5
6.5
2012
€m
101.4
348.9
10.4
14.3
5.8
2011
€m
109.8
378.6
6.5
8.5
6.5
Non-current assets
2011
2012
€m
€m
56.6
144.1
-
0.6
-
73.3
133.9
-
-
-
716.7
770.0
480.8
509.9
201.3
207.2
The geographical analysis of revenue and net revenue is based on the location of the third party customers. The geographical
analysis of non-current assets is based on the geographical location of the assets. Non-current assets comprise property, plant
& equipment and advances to customers repayable beyond one year. Intangible assets, goodwill and deferred tax assets are not
allocated.
2. OPERATING COSTS
2012
2011
Before Exceptional
items
(note 5)
€m
exceptional
items
€m
exceptional
items
€m
Before Exceptional
items
(note 5)
€m
Total
€m
Raw material cost of goods sold
Inventory write-down/(recovered) (note 15)
Employee remuneration (note 3)
Direct brand marketing
Other operating, selling and administration costs
Depreciation
Amortisation
Research and development costs
Revaluation of property, plant & machinery (note 12)
Auditor remuneration (a):
- audit services
- non audit services
Operating lease rentals:
- land & buildings
- plant & machinery
- other
176.2
0.3
70.3
48.2
53.2
20.2
0.1
0.5
-
0.3
0.3
4.0
0.4
0.9
-
(0.7)
(10.2)
-
4.0
-
-
-
2.0
-
-
-
-
-
176.2
(0.4)
60.1
48.2
57.2
20.2
0.1
0.5
2.0
0.3
0.3
4.0
0.4
0.9
229.8
1.1
62.4
59.0
65.6
21.2
0.1
0.9
-
0.4
0.6
3.0
0.8
0.6
-
(0.2)
2.9
-
8.4
-
-
-
-
-
-
-
-
-
Total
€m
229.8
0.9
65.3
59.0
74.0
21.2
0.1
0.9
-
0.4
0.6
3.0
0.8
0.6
Total
Relating to discontinued operations (note 8)
374.9
(5.3)
(4.9)
0.1
370.0
(5.2)
445.5
(36.5)
11.1
0.9
456.6
(35.6)
Relating to continuing operations
369.6
(4.8)
364.8
409.0
12.0
421.0
8 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
2. OPERATING COSTS - CONTINUED
(a)
Auditor remuneration The remuneration of the Group’s statutory auditor, being the Irish firm of the principal auditor of the
Group, KPMG, Chartered Accountants is as follows:
2012
€m
2011
€m
Audit of the Group financial statements
Other assurance services
Tax advisory services
Other non audit services
Total
0.3
0.1
0.2
-
0.6
0.3
0.1
0.3
0.2
0.9
The audit fee for the audit of the financial statements of the Company was less than €0.1m in the current and prior financial year.
3. EMPLOyEE NUMBERS & REMUNERATION COSTS
The average number of persons employed by the Group (including executive Directors) during the year, analysed by category,
was as follows:-
Sales & marketing
Production & distribution
Administration
Total
2012
Number
2011
Number
295
524
135
312
549
145
954
1,006
The actual number of persons employed by the Group as at 29 February 2012 was 926 (28 February 2011: 972).
The aggregate remuneration costs of these employees can be analysed as follows:-
Wages, salaries and other short term employee benefits
Severance costs (note 5)
Social welfare costs
Retirement benefit obligations – defined benefit schemes (note 22)
Retirement benefit obligations – defined contribution schemes
Equity settled share-based payments (note 4)
Partnership & matching share schemes (note 4)
Charged to the income statement
2012
€m
54.8
4.6
5.6
(13.3)
5.7
2.6
0.1
60.1
2011
€m
45.1
4.9
5.4
0.8
5.1
4.0
-
65.3
Actuarial loss/(gain) on retirement benefit obligations recognised in other comprehensive income (note 22) 19.0
(0.2)
Total employee benefits
79.1
65.1
4. SHARE-BASED PAyMENTS
In May 2004, the Group established an equity settled Executive Share Option Scheme (ESOS) under which options to purchase
shares in C&C Group plc are granted to certain executive Directors and members of management. Under the terms of the
scheme, the options are exercisable at the market price prevailing at the date of the grant of the option. The maximum grant that
can normally be made to any individual in any one year is an award of 150% of basic salary in that year. Options have been granted
under this scheme in each year since 2004.
Under this scheme, options will not normally be exercisable until three years after the date of grant and are subject to meeting
a specific performance target. This performance target requires the Group’s earnings per share (before exceptional items) to
increase by 5% in excess of the Irish Consumer Price Index (CPI) over three financial years on a compound basis, in order for
options to vest. If after the relevant three-year period (i.e. 3 years from date of grant) the performance target is not met the options
lapse. The performance target for options granted in June 2007 and 2008 was not achieved resulting in these awards lapsing.
In January 2006, the Group established a Long Term Incentive Plan (LTIP (Part I)) under the terms of which options to
purchase shares in C&C Group plc are granted at nil cost to certain executive Directors and key employees. Options under
this scheme were granted in January 2006, in June of each year from 2006 through to 2008, and during the current financial
year in June 2011 and February 2012.
Under this plan, awards of up to 100% of basic salary may normally be granted. All awards granted prior to 2011 were
forfeited, lapsed or did not vest. The Remuneration Committee has adopted performance conditions for the options awarded
during 2011 and 2012 as follows:
8 1
NOTES - CONTINUED
Forming part of the financial statements
4. SHARE-BASED PAyMENTS - CONTINUED
• With regard to 50% of the award, a performance condition relating to total shareholder return (TSR) applies. 30% of this part of
the award vests if the Group’s TSR over a three-year period equals the median TSR of a comparator group; 100% of this part of
the award vests if the Group’s TSR over a three-year period equals or exceeds the TSR of the upper quartile of the comparator
group; for performance between the median and the upper quartile there is straight-line pro-rating between 30% and 100%.
None of this part of the award vests if the Group’s TSR over a three-year period is less than the median TSR of a comparator
group. In addition, the real growth in the Group’s EPS over the three-year period must be 5% or more per annum (compared with
Irish CPI) over the same period; alternatively the Remuneration Committee must be satisfied that the Group’s underlying financial
performance warrants that level of vesting; otherwise the award lapses.
• With regard to the remaining 50% of the award, a performance condition relating to growth in earnings per share (EPS) applies.
30% of this part of the award vests if the Group’s EPS over a three year period achieves 4% per annum real growth (compared
with Irish CPI). 100% of this part of the award vests if the Group’s EPS over a three year period achieves 10% per annum real
growth. There is straight-line pro-rating between 30% and 100% for performance between 4% and 10% per annum. None
of this part of the award vests if the real growth in the Group’s EPS over a three-year period is less than 4% per annum. EPS
is calculated based on Earnings before exceptional items and net of other adjustments authorised by the Remuneration
Committee.
In December 2008, shareholders at an Extraordinary General Meeting approved the establishment of a Joint Share Ownership
Plan (JSOP) where certain employees of the Company and its subsidiaries are eligible to participate in the Plan at the discretion of
the Remuneration Committee. Under this plan, Interests in the form of a restricted interest in ordinary shares in the Company are
awarded to executive directors and key members of senior management on payment upfront to the Company of an amount equal
to 10% of the initial issue price of the shares on the acquisition of the Interest. The participants are also required to pay a further
amount if the tax value of their interest exceeds the price paid. When the further amount is paid, the Company compensates the
participant for the obligation to pay this further amount by paying him an equivalent amount, which is, however, subject to income
tax in the hands of the participant.
The vesting of Interests granted is subject to the following conditions. All of the Interests are subject to a time vesting condition
with one-third of the Interest in the shares vesting on each of the first, second and third anniversary of acquisition. In addition, half
of the Interests in the shares are subject to a pre-vesting share price target. In order to benefit from those Interests the Company’s
share price must be greater than €2.50 for 13,800,000 of the Interests initially awarded, and €4.00 for 2,200,000 of the Interests
initially awarded, for at least 20 days out of 40 consecutive dealing days during the five-year period commencing on the date of
acquisition of the Interest.
When an Interest vests, the trustees may, at the request of the participant and on payment of the further amount, if relevant,
transfer shares to the participant of equal value to the participant’s Interest or the shares may be sold by the trustees, who will
account to the participant for the difference between the sale proceeds (less expenses) and the Hurdle Value (balancing 90% of the
acquisition price on the acquisition of the Interest).
In February 2010, the Group established a Restricted Share Award Scheme under the terms of which options to purchase shares
in C&C Group plc at nil or nominal cost are granted to certain key members of senior management.
The vesting conditions for these awards are similar to those for the JSOP award in that half of the awards will vest one-third
on each of the first, second and third anniversary of date of grant subject to continued employment only and half will vest on
the later of the achievement of the performance condition of meeting a €4.00 share price target and the third anniversary of
the award date subject to continued employment.
In June 2010, the Group established a Recruitment and Retention Plan under the terms of which options to purchase shares
in C&C Group plc at nil or nominal cost are granted to certain key employees.
The performance conditions and/or other terms and conditions for awards granted under this plan are specifically approved
by the Board of Directors at the time of each individual award, following a recommendation by the Remuneration Committee.
The Board approved the award of 81,000 options under this plan in June 2010 and an award of 33,166 options in August 2011, in
each case subject to time vesting conditions only so as to normally vest in three equal tranches, on the first, second and third
anniversaries of grant and a further award of 31,791 options granted in August 2011 are also subject to time vesting conditions
only, so as to normally vest on the third anniversary of grant.
Obligations arising under the Restricted Share Award Scheme and the Recruitment and Retention Plan will be satisfied
by the purchase of existing shares on the open market. On settlement any difference between the amount included in the
Share-based payment reserve account and the cash paid to purchase the shares is recognised in retained income via the
statement of changes in equity.
8 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
4. SHARE-BASED PAyMENTS - CONTINUED
In May 2011, the Group established a deferred equity settled share bonus scheme, Long Term Incentive Plan (LTIP
(Part II)), under which shares are awarded to certain employees (excluding executive directors and senior management) at
nil cost, at the end of the financial year in which the award is granted, if the performance conditions set by the Remuneration
Committee are achieved and subject to a two year time vesting period post the end of the relevant financial year. For the
current financial year, the Remuneration Committee agreed three levels of award linked to operating profit targets. Based on
the actual results to 29 February 2012, a right to receive shares at nil cost equating to 23% of salary was granted to certain
employees and a right to receive shares at a cost equating to 5% of salary was granted to other employees. The maximum
number of shares over which awards were granted under the LTIP (Part II) in relation to the financial year ended 29 February
2012 was set by reference to a share price of €3.55, being the share price on the 18 May 2011, the date the results for the
financial year ended 28 February 2011 were announced. Awards will vest in May 2014 subject to continued employment only.
In November 2011, the Group set up Partnership and Matching Share Schemes for all ROI and UK based employees of the Group
under the approved profit sharing schemes referred to below. Under these schemes, employees can invest in shares in C&C Group
plc (“contributory/partnership” shares) that will be matched on a 1:1 basis by the Company (“matching shares”) subject to Revenue
approved limits. Both the contributory and matching shares are held on behalf of the employee by the Scheme trustee, Capita
Corporate Trustees Limited. The shares are purchased on the open market on a monthly basis at the market price prevailing at the
date of purchase with any remaining cash amounts carried forward and used in the next share purchase. The shares are held in
trust for the participating employee, who has full voting rights and dividend entitlements on both partnership and matching shares.
Matching shares may be forfeited and/or tax penalties may apply if the employee leaves the Group or removes their contributory
shares within the Revenue-stipulated vesting period. The Revenue stipulated vesting period for matching shares awarded under
the ROI scheme is three years and under the UK scheme is five years. The Group held 33,047 matching shares in Trust at 29
February 2012.
In 2001, the Group entered into an agreement with trade unions representing the majority of its employees, which provided for
the establishment of an approved save as you earn scheme and approved profit sharing schemes (APSS) in ROI and the UK. A
discretionary scheme was put in place for the year ended 28 February 2007. Under this scheme, due to exceptional earnings per
share growth in that year, the Remuneration Committee and the Board approved and granted to employees shares to the value
of between 3% and 4% of basic salary remuneration subject to a minimum allocation of €1,000 per employee. The cost, which
was reflected in the income statement in the year ended 28 February 2007, was €2.5m. The Group purchased 189,061 shares
and placed these shares in Irish/UK Revenue approved employee trusts where they are held in trust on behalf of each employee
and where each employee has full voting rights and dividend entitlements. Tax penalties apply should the employees sell the
shares before the vesting period expires. The vesting period for shares awarded to Republic of Ireland resident employees
expired in June 2010 and all remaining shares were transferred out of the Employee Benefit Trust and into the Participants’
individual names while the vesting period for shares awarded to UK resident employees will expire in June 2012.
Award valuation
The fair values assigned to the ESOS options granted were computed in accordance with a binomial valuation methodology;
the fair value of options awarded under the LTIP (Part I) were computed in accordance with the stochastic model for the TSR
element and the binomial model for the EPS element; the fair value of options awarded under the Recruitment and Retention
Plan and LTIP (Part II) were computed in accordance with a binomial model; and the fair value of the Interests awarded under
the Joint Share Ownership Plan and the Restricted Share Award Plan were computed using a Monte Carlo simulation model.
As per IFRS 2 Share-based Payment, market based vesting conditions, such as the LTIP (Part I) TSR condition and the share
price target conditions in the Joint Share Ownership Plan and the Restricted Share Award Plan, have been taken into account
in establishing the fair value of equity instruments granted. Non-market or performance related conditions were not taken
into account in establishing the fair value of equity instruments granted instead these non-market vesting conditions are
taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so
that, ultimately the amount recognised for services received as consideration for the equity instruments granted is based on
the number of equity instruments that eventually vest.
8 3
NOTES - CONTINUED
Forming part of the financial statements
4. SHARE-BASED PAyMENTS - CONTINUED
The main assumptions used in the valuations were as follows:-
LTIP (Part I)
options
granted
Feb 2012
Recruitment LTIP (Part I)
options
granted
June 2011
& retention
plan
August 2011
ESOS LTIP (Part II)
options
granted
May 2011
options
granted
May 2011
ESOS Recruitment
& retention
plan
June 2010
options
granted
July 2010
ESOS
options
granted
June 2010
ESOS
options
granted
May 2010
Exercise price
Risk free
interest rate
Expected volatility
Expected life
Dividend yield
-
-
-
€3.61
-
€3.32
-
€3.21
€3.21
0.27%
26.0%
3 years
1.90%
-
-
1-3 years
2.16%
1.66%
51.1%
3 years
1.87%
2.37%
55.1%
5 years
1.82%
-
-
3 years
1.86%
1.47%
50.8%
5 years
2.0%
-
-
1-3 years
1.6%
1.36%
50.8%
5 years
2.04%
1.58%
50.8%
5 years
1.99%
Details of the share entitlements and share options granted under these schemes together with the share option expense
are as follows:
Grant date
Number of
options/
Interests
equity Outstanding
at 29
granted February 12
Vesting
period
Executive Share Option Scheme (ESOS)
20 June 2005
15 June 2006
13 June 2007
13 June 2008
13 May 2009
26 May 2010
2 June 2010
21 July 2010
24 May 2011
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
1,708,200
846,900
318,500
1,013,700
4,336,300
803,900
127,200
2,944,400
658,930
33,500
38,300
-
-
2,669,200
374,600
127,200
2,612,600
367,790
Long Term Incentive Plan (Part I)
29 June 2011
29 February 2012
3 years
3 years
192,662
328,448
192,662
328,448
Long Term Incentive Plan (Part II)
18 May 2011
3 years
154,993
154,993
Joint Share Ownership Plan (JSOP)
Grant
price
€
3.56
6.52
11.53
5.11
1.94
3.21
3.21
3.32
3.61
-
-
-
Fair value
at date
of grant
€
Expense in
Income statement
2011
2012
€m
€m
Market
value at
date of
grant
€
3.56
6.52
11.53
5.11
1.94
3.21
3.21
3.32
3.61
0.72
1.24
2.76
0.98
0.72
1.21
1.14
1.16
1.56
-
-
-
-
0.5
-
-
1.1
0.2
0.1
-
3.53
3.61
2.18-3.34
1.84-3.46
3.55
3.36
0.1
-
-
-
-
1.2
0.3
-
0.8
-
-
-
-
0.9
0.4
0.1
18 December 2008
03 June 2009
17 December 2009
1-3 years
1-3 years
1-3 years
12,800,000
1,000,000
2,200,000
9,386,668
1,000,000
750,000
1.15
1.15
2.47
1.315 0.16 - 0.21
1.01–1.09
2.32
0.11–0.16
2.76
0.2
0.2
-
Restricted Share Award Scheme
26 February 2010
1-3 years
429,148
89,406
Recruitment & Retention Plan
29 June 2010
31 August 2011
1-3 years
1-3 years
81,000
64,957
54,000
64,957
-
-
-
3.20
3.05
2.94
2.89-2.99
2.70
2.26
0.1
0.3
APSS Scheme (2007)
Partnership and Matching Share Schemes
30,009,238 18,244,324
-
33,047
189,061
66,094
30,264,393 18,277,371
11.39
11.39
11.39
0.1
-
2.6
-
0.1
2.7
-
-
4.0
-
-
4.0
The amount charged to the income statement in respect of the above award grants assumes that all outstanding options
granted during 2011 and 2012 will vest and all qualifying conditions will be achieved. Options granted under the ESOS during
2007 and 2008 did not achieve the related performance condition and consequently all outstanding options lapsed. As the
Directors considered the likelihood of achieving the non-market vesting conditions remote no charge had been taken to the
income statement in prior years.
8 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
4. SHARE-BASED PAyMENTS - CONTINUED
The amount charged to the income statement includes an accelerated charge of €0.5m (2011: €0.9m), in relation to
employees leaving the Group as part of a restructuring programme, for share options granted under the executive share
option scheme where the underlying conditions were deemed to have been met at the date of departure. These employees
were deemed ‘qualifying leavers’ under the terms of the scheme, with all share options granted deemed to have vested and
the exercise period reduced from 4 years to 6 months.
A summary of activity under the Group’s share option schemes and Joint Share Ownership Plan together with the weighted
average exercise price of the share options is as follows:
Outstanding at beginning of year
Granted
Exercised
Forfeited/lapsed
Outstanding at end of year
2012
Weighted
average
exercise
price
€m
Number of
options/
equity
Interests
20,342,023
1,399,990
(952,143)
(2,545,546)
18,244,324
1.79
1.71
2.02
3.53
1.73
2011
Weighted
average
exercise
price
€m
Number of
options/
equity
Interests
21,736,448
3,956,500
(4,003,232)
(1,347,693)
20,342,023
1.60
3.23
1.18
3.18
1.79
The aggregate number of share options/equity Interests exercisable at 29 February 2012 was 10,663,116 (2011: 6,545,377).
The unvested share options/equity Interests outstanding at 29 February 2012 have a weighted average vesting period
outstanding of 1.0 years (2011: 1.4 years). The weighted average contractual life of vested and unvested share options/equity
Interests is 4.2 years (5.2 years).
The weighted average market share price at date of exercise of all share options/equity Interests exercised during the year
was €3.22 (2011: €3.28); the average share price for the year was €3.22 (2011: €3.26); and the market share price as at 29
February 2012 was €3.665 (28 February 2011: €3.535).
5. EXCEPTIONAL ITEMS
2012
Continuing Discontinued
operations operations
€m
€m
2011
Continuing Discontinued
Total operations operations
€m
€m
€m
Restructuring costs
Retirement benefit obligations
Recovery of previously impaired inventory
IT systems implementation and integration costs
Revaluation of property, plant & equipment (note 12)
Loss/(profit) from discontinued operations (note 8)
Foreign currency reserve recycled to the income
statement on disposal
Total (profit)/loss before tax
Income tax (credit)/expense
Total (profit)/loss after tax
(a) Restructuring costs
4.6
(14.7)
(0.7)
4.0
2.0
-
-
(4.8)
(0.4)
(5.2)
-
(0.1)
-
-
-
1.1
0.7
1.7
-
1.7
4.6
(14.8)
(0.7)
4.0
2.0
1.1
4.9
(1.1)
(0.2)
8.4
-
-
-
(0.9)
-
-
-
(224.7)
Total
€m
4.9
(2.0)
(0.2)
8.4
-
(224.7)
0.7
-
-
-
(3.1)
(0.4)
(3.5)
12.0
(2.9)
(225.6)
0.1
(213.6)
(2.8)
9.1
(225.5)
(216.4)
Restructuring costs, comprising severance and other initiatives arising from cost cutting initiatives, resulted in an
exceptional charge before taxation of €4.6m (2011: €4.9m).
(b) Retirement benefit obligations
The exceptional gain of €14.8m in the current year relates both to:
• the recognition of a past service gain, net of expenses, of €14.7m following the conclusion of the Group’s pension
reform programme and the receipt of a Pensions Board direction under Section 50 of the Pensions Act 1990, removing
guaranteed pension increases and replacing them with a reduced level of guaranteed increase for three years
commencing 2012 and thereafter for all future pension increases to be on a discretionary basis, resulting in a positive
impact on the valuation of the Group’s retirement benefit obligations; and,
• a curtailment gain of €0.1m arising from the Group’s disposal of the Northern Ireland wholesale business and the
reclassification of these employees from active to deferred members.
The past service gain represents the difference between liabilities valued using a pension increase assumption of 3%
per annum versus 2.25% per annum, assumed to be the average discretionary increase rate. A curtailment gain arises
where the value of the pension benefit of a deferred member is less than that of an active member. This occurs when the
long term salary increase assumption is greater than the long term inflation expectation.
8 5
NOTES - CONTINUED
Forming part of the financial statements
5. EXCEPTIONAL ITEMS - CONTINUED
The exceptional gain of €2.0m in the prior financial year relates to defined benefit pension scheme curtailment gains
arising as a result of the following: the Group’s disposal of its Spirits & Liqueurs business to William Grant & Sons
Holdings Limited and the reclassification of these employees from active to deferred members (€0.9m); restructuring
initiatives in Northern Ireland following the integration of the acquired Tennent’s business (€0.1m); and a cost reduction
programme in the Group’s cider manufacturing facility in Clonmel, Co. Tipperary (€1.0m).
(c) Recovery of previously impaired inventory
During the financial year ended 28 February 2009, the Group’s stock holding of apple juice at circa 36 months of forecasted
future sales was deemed excessive in light of anticipated future needs, forward purchase commitments and useful life of
the stock on hand. Accordingly the Group recorded an impairment charge in relation to excess apple juice stocks. During
the current and previous financial year, some of the previously impaired juice stocks were recovered and used by the
Group. As a result this stock was written back to operating profit at its recoverable value resulting in a gain of €0.7m (2011:
€0.2m). The Group has recovered total juice stocks of €0.9m in relation to stocks for which an impairment charge was
recognised in FY2009.
(d) IT systems implementation and integration costs
During the financial year, the Group incurred consultancy costs in relation to the commencement of the process of
integrating the acquired Hornsby’s brand with the Group’s existing business; and the completion of the second phase
of the IT systems implementation project with respect to the migration of the Gaymers cider business onto a new IT
system, allowing the business to fully integrate with the existing Magners business. The ‘first phase’ of the systems
implementation moved Gaymers off the transitional services arrangement onto a standalone IT system platform,
this phase together with the transfer of the Tennent’s business onto a new IT systems platform was completed and
accounted for in the prior year.
The costs have been classified as exceptional on the basis of materiality. These costs primarily relate to external
consultant fees and other costs associated with the implementation of the new IT systems platform and which both, in
accordance with IAS 16 Property, Plant and Equipment, were not appropriate for capitalisation within Property, plant &
equipment in the balance sheet.
(e) Revaluation of property, plant & machinery
Property (comprising land and buildings) and plant & machinery are valued at fair value on the balance sheet and
reviewed for impairment on an annual basis. During the financial year, the Group engaged external valuers Ronan
Diamond BSc (Hons) MSCSI MRICS and Brian Gilson, BSc (Surv) MSCSI MRICS MCI Arb - Lisney to value its freehold
properties in the Republic of Ireland; David Fawcett, FRICS RICS Registered Valuer - Sanderson Weatherall to value its
plant & machinery in the Republic of Ireland, and, Timothy Smith BSc MRICS RICS Registered Valuer and Joseph ML
Funtek BSc MRICS RICS Registered Valuer - Gerald Eve to value both its freehold properties and plant & machinery
in the United Kingdom. Using the valuation methodologies outlined in note 12, this resulted in a net revaluation loss of
€2.0m accounted for in the income statement and a further net loss of €1.7m accounted for within other comprehensive
income on the basis that it reduced a revaluation surplus previously recognised in respect of an asset in Clonmel and
created a revaluation surplus in respect of the Group’s Scottish buildings.
(f) Loss/(profit) from discontinued operations, net of tax /Recycling of Foreign Currency Reserve on disposal
The loss on discontinued operations of €1.1m relates to a €0.1m profit arising on the disposal of the Group’s Northern Ireland
wholesaling business (Quinns of Cookstown) to Britvic Northern Ireland Limited on 30 June 2011 for a gross consideration
of €4.8m (£4.3 m) and a loss of €1.2 m in relation to a working capital settlement to reflect ‘normalised working capital’ as
set out in the Sale and Purchase Agreement following the prior year disposal of the Group’s Spirits & Liqueurs business. The
Group also recognised a loss of €0.7m on the recycling of a foreign currency reserve to the income statement following the
disposal of the Group’s NI wholesaling business.
During the prior year, the Group completed the disposal of its Spirits & Liqueurs division to William Grant & Sons
Holdings Limited for a gross cash consideration of €300.0m realising a profit of €224.7m.
8 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
6. FINANCE INCOME AND EXPENSE
Recognised in income statement
Finance income:
Interest income on bank deposits
Total finance income
Finance expense:
Interest expense on interest bearing bank borrowings
Expense arising on interest rate swaps designated as cash flow hedges against interest exposure
Ineffective portion of change in fair value of cash flow hedges
Unwinding of discount on provisions
Total finance expense
Net finance expense
Recognised directly in other comprehensive income
Effective portion of change in fair value of cash flow hedges
Fair value of foreign exchange cash flow hedges transferred to income statement
Fair value of interest rate swap cash flow hedges transferred to income statement
Deferred tax on cash flow hedges recognised directly in other comprehensive income
Foreign currency translation differences arising on foreign currency borrowings
designated as net investment hedges
Foreign currency translation differences arising on the net investment in foreign operations
Foreign currency reserve recycled to income statement on disposal of foreign currency subsidary (note 8)
Net income recognised directly in other comprehensive income
7.
INCOME TAX
(a) Analysis of charge in year recognised in the income statement
Current tax:
Irish corporation tax
Foreign corporation tax
Adjustment in respect of previous years
Deferred tax:
Irish
Foreign
Total income tax expense recognised in income statement
Relating to discontinued operations
- discontinued operations before exceptional items
- discontinued operations exceptional items
Relating to continuing operations
- continuing operations before exceptional items
- continuing operations exceptional items
Total
2012
€m
2011
€m
(0.7)
(0.7)
2.4
2.5
(0.1)
1.0
5.8
5.1
(1.1)
0.1
2.4
(0.1)
1.7
3.6
0.7
7.3
(1.2)
(1.2)
6.6
3.1
(0.1)
1.0
10.6
9.4
(2.9)
4.3
3.0
(0.5)
(3.3)
16.5
-
17.1
2012
€m
2011
€m
5.3
2.6
(0.2)
7.7
4.5
1.2
5.7
13.4
-
-
4.1
2.3
(1.8)
4.6
3.1
1.1
4.2
8.8
0.4
0.1
13.8
(0.4)
11.2
(2.9)
13.4
8.8
8 7
NOTES - CONTINUED
Forming part of the financial statements
7.
INCOME TAX - CONTINUED
The tax assessed for the year is different from that calculated at the standard rate of corporation tax in the Republic of
Ireland, as explained below.
Profit before tax from continuing operations
Profit from discontinued operations (note 8)
Foreign currency reserve recycled to the income statement (note 8)
(Loss)/profit on disposal of discontinued operations (note 8)
Tax at standard rate of corporation tax in the Republic of Ireland of 12.5%
Actual tax charge is affected by the following:
Expenses not deductible for tax purposes
Adjustments in respect of prior years
Differences in effective tax rates on overseas earnings
Manufacturing relief
Non taxable loss/(profit)
Other differences
Total income tax
(b) Deferred tax recognised directly in other comprehensive income
Deferred tax arising on movement in defined benefit pension obligations
Deferred tax arising on movement in derivatives designated as cash flow hedges
2012
€m
110.9
-
(0.7)
(1.1)
2011
€m
79.5
5.0
-
224.7
109.1
309.2
13.6
38.7
0.7
(0.2)
0.8
-
0.2
(1.7)
1.1
(1.8)
0.5
(0.8)
(28.1)
(0.8)
13.4
8.8
(2.4)
0.1
(2.3)
-
0.5
0.5
(c) Factors that may affect future charges
Future income tax charges may be impacted by changes to the corporation tax rates and/or changes to corporation tax
legislation in force in the jurisdictions in which the Group operates and by any adoption or implementation of the current
draft EU Directive and proposal in relation to the Common Consolidated Corporate Tax Base “CCCTB” which seeks to alter
the existing system of allocating a group’s taxable profits between different territories.
8. DISCONTINUED OPERATIONS
On 30 June 2011, the Group completed the disposal of its Northern Ireland wholesaling business (Quinns of Cookstown) to
Britvic Northern Ireland Limited for a consideration of €4.8m (£4.3m), while on 30 June 2010, the Group completed the disposal
of its Spirits & Liqueurs business to William Grant & Sons Holdings Limited for a gross cash consideration of €300.0m.
The Group, having considered IFRS 5 Non-current Assets Held for Sale and Discontinued Operations para 32, believe that the
classification of the Group’s disposed Northern Ireland wholesaling business as a discontinued operation and as a consequence
the provision of directly comparable information better assists the users of these financial statements in evaluating both the
financial performance of the Group and more specifically the financial performance of its third party brand distribution activities.
In line with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, depreciation was not charged on property,
plant & equipment held in these businesses from the date the assets were classified as ‘held for sale’ and the businesses
are presented as discontinued operations for all periods presented and are shown separately from continuing operations.
Results of discontinued operations
Revenue
Net revenue
Expenses, net
Operating (loss)/profit
Income tax expense
2012
Before Exceptional
items
(note 5)
€m
exceptional
items
€m
2011
Before Exceptional
items
(note 5)
€m
exceptional
items
€m
Total
€m
5.2
5.2
(5.3)
(0.1)
-
(0.1)
-
-
-
-
0.1
0.1
-
0.1
(0.7)
(1.1)
5.2
40.6
5.2
(5.2)
-
-
-
(0.7)
(1.1)
40.6
(36.5)
4.1
(0.4)
3.7
-
-
3.7
-
-
0.9
0.9
(0.1)
0.8
-
224.7
Total
€m
40.6
40.6
(35.6)
5.0
(0.5)
4.5
-
224.7
Trading (loss)/profit from discontinued operations
Foreign currency reserve recycled to the income statement on disposal
(Loss)/gain on sale of discontinued operations
(Loss)/profit from discontinued operations
(0.1)
(1.7)
(1.8)
8 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
225.5
229.2
8. DISCONTINUED OPERATIONS - CONTINUED
The exceptional operating profit before tax relates to curtailment gains on the Group’s defined benefit pension schemes; a
current year gain of €0.1m following the disposal of Group’s Northern Ireland wholesaling business (Quinns of Cookstown)
and a prior year gain of €0.9m following the June 2010 disposal of the Group’s Spirits & Liqueurs business and the
reclassification of those employees from active to deferred members.
The loss on discontinued operations of €1.1m relates to a €0.1m profit arising on the disposal of the Group’s Northern
Ireland wholesaling business to Britvic Northern Ireland Limited on 30 June 2011 for a gross consideration of €4.8m (£4.3m)
and a loss of €1.2m in relation to a working capital settlement to reflect ‘normalised’ working capital’ as set out in the Sale
and Purchase Agreement following the prior year disposal of the Group’s Spirits & Liqueurs business.
During the prior year, the Group completed the disposal of its Spirits & Liqueurs division to William Grant & Sons Holdings
Limited for a gross cash consideration of €300.0m realising a profit of €224.7m.
Cash flows from discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash inflow from investing activities
Net cash inflow from discontinued operations
Effect of disposal on the financial position of the Group
Property, plant & equipment
Goodwill
Inventories
Trade & other receivables
Derivative financial instruments
Trade & other payables
Net assets and liabilities disposed of
Consideration receivable
Costs of disposal payable
Net proceeds receivable
Profit on disposal of net assets and liabilities
Fair value of derivative financial instruments transferred
from cashflow hedge reserve to income statement
Gain on sale of discontinued operations
Working capital settlement - Spirits & Liquers
(Loss)/ profit from discontinued operations
2012
€m
2011
€m
(1.0)
4.7
0.8
294.9
3.7
295.7
NI
wholesaling
business
2012
€m
Spirits
and
Liqueurs
2011
€m
0.9
-
1.2
2.5
-
-
4.6
2.5
49.6
6.6
17.1
(3.0)
(4.5)
68.3
4.8
(0.1)
302.0
(6.0)
4.7
0.1
-
0.1
(1.2)
(1.1)
296.0
227.7
(3.0)
224.7
-
224.7
In the prior year, the consideration receivable included a working capital settlement to reflect the level of working capital
disposed of and that considered ‘normalised’ as set out in the Sale and Purchase Agreement, while costs of disposal payable
included an accrual for costs not yet paid.
8 9
NOTES - CONTINUED
Forming part of the financial statements
9. DIVIDENDS
Dividends paid:
Final: paid 3.3c per ordinary share in July 2011 (2011: 3.0c paid in September 2010)
Interim: paid 3.67c per ordinary share in December 2011 (2011: 3.3c paid in December 2010)
Total equity dividends
Settled as follows:
Paid in cash
Scrip dividend
2012
€m
2011
€m
10.7
12.0
22.7
18.5
4.2
22.7
9.5
10.7
20.2
12.1
8.1
20.2
The Directors have proposed a final dividend of 4.5 cent per share (2011:3.3 cent), which is subject to shareholder approval at
the Annual General Meeting, giving a proposed total dividend for the year of 8.17 cent per share (2011: 6.6 cent).
Dividends of 6.97 cent per ordinary share were recognised as a deduction from the retained income reserve in the year ended
29 February 2012 (2011: 6.3 cent).
Dividends declared after the balance sheet date are not recognised as a liability at the balance sheet date.
10. EARNINGS PER ORDINARy SHARE
Denominator computations
Number of shares at beginning of year
Shares issued in lieu of dividend
Shares issued in respect of options exercised
Number of shares at end of year
Weighted average number of ordinary shares (basic)*
Adjustment for the effect of conversion of options
Weighted average number of ordinary shares, including options (diluted)
* excludes 12.4m treasury shares (2011: 12.6m)
Profit attributable to ordinary shareholders
Earnings as reported
Adjustment for exceptional items, net of tax (note 5)
Earnings as adjusted for exceptional items, net of tax
Basic earnings per share
Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Continuing operations
Earnings from continuing operations as reported
Adjustment for exceptional items, net of tax (note 5)
Earnings from continuing operations as adjusted for exceptional items, net of tax
Basic earnings per share
Basic earnings per share
Adjusted basic earnings per share
9 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Number
‘000
337,196
1,370
709
Number
‘000
334,068
2,538
590
339,275
337,196
325,509
8,294
321,579
8,492
333,803
330,071
2012
€m
95.7
(3.5)
92.2
Cent
29.4
28.3
28.7
27.6
€m
97.5
(5.2)
92.3
Cent
30.0
28.3
2011
€m
300.4
(216.4)
84.0
Cent
93.4
26.1
91.0
25.4
€m
71.2
9.1
80.3
Cent
22.1
25.0
10. EARNINGS PER ORDINARy SHARE - CONTINUED
Diluted earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
Discontinued operations
Earnings from discontinued operations as reported
Adjustment for exceptional items, net of tax (note 5)
Earnings from discontinued operations as adjusted for exceptional items, net of tax
Basic earnings per share
Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
29.2
27.6
€m
(1.8)
1.7
(0.1)
Cent
(0.6)
-
(0.5)
-
21.6
24.3
€m
229.2
(225.5)
3.7
Cent
71.3
1.1
69.4
1.1
Basic earnings per share is calculated by dividing the profit attributable to the ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding ordinary shares purchased/issued by the Company and held
as treasury shares on the basis that there is further consideration receivable in respect of these shares (at 29 February 2012:
12.4m shares; at 28 February 2011: 12.6m shares).
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. The average market value of the Company’s shares for purposes
of calculating the dilutive effect of share options was based on quoted market prices for the period of the year that the
options were outstanding.
Employee share options, which are performance-based, are treated as contingently issuable shares because their issue is
contingent upon satisfaction of specified performance conditions in addition to the passage of time. In accordance with IAS
33 Earnings per Share, these contingently issuable shares (totalling at 53,643 at 29 February 2012 and 324,487 at 28 February
2011) are excluded from the computation of diluted earnings per share where the vesting conditions would not have been
satisfied as at the end of the reporting period. Vesting of certain Interests awarded under the Joint Share Ownership Plan
(totalling 375,000 at 29 February 2012 and 750,000 at 28 February 2011) are also contingent upon satisfaction of specified
performance conditions and these have also been excluded from the computation of diluted earnings per share.
11. BUSINESS COMBINATIONS
During the financial year ended 28 February 2010, the Group completed the acquisitions of the Tennent’s beer business and the
Gaymers Cider business and completed a provisional assignment of fair values to identifiable net assets acquired. As permitted
under IFRS 3 (2004) Business Combinations, these provisional valuations were amended during the financial year ended 28
February 2011. The adjustments to the original fair values are set out below and relate to the costs of acquisition, the fair values of
trade receivables & accruals and the recognition of an onerous lease obligation.
The Tennent’s beer business includes the assets and goodwill of the Tennent’s beer business, including the rights to the
Tennent’s brand worldwide (with the exception of Tennent’s Super and Tennent’s Pilsner in certain territories), the Wellpark
Brewery in Glasgow and certain distribution rights in relation to AB InBev products in Ireland, Northern Ireland and Scotland,
while the Gaymer Cider business includes the assets and goodwill of the business, an established manufacturer and supplier
of cider in the UK, including the rights to the Gaymers, Blackthorn, Olde English and other brands.
9 1
NOTES - CONTINUED
Forming part of the financial statements
11. BUSINESS COMBINATIONS - CONTINUED
Initial fair
value Adjustment
to initial
Revised
fair
value
fair value 28 February
2011
€m
in 2011
€m
assigned
28 February
2010
€m
65.5
70.8
6.0
49.4
23.6
(25.0)
0.5
-
-
-
0.7
-
4.0
-
65.5
70.8
6.0
50.1
23.6
(21.0)
0.5
190.8
4.7
195.5
25.7
(4.3)
21.4
216.5
0.4
216.9
Initial fair Adjustment
to initial
fair value
€m
value
assigned
€m
Revised
fair
value
€m
35.8
10.9
12.5
1.4
(2.4)
(5.3)
(4.5)
-
-
-
-
-
(6.3)
-
35.8
10.9
12.5
1.4
(2.4)
(11.6)
(4.5)
48.4
(6.3)
42.1
3.7
52.1
6.7
0.4
10.4
52.5
Initial fair Adjustment
to initial
fair value
€m
value
assigned
€m
Revised
fair
value
€m
101.3
81.7
18.5
50.8
23.6
(27.4)
(5.3)
(4.0)
-
-
-
0.7
-
4.0
(6.3)
-
101.3
81.7
18.5
51.5
23.6
(23.4)
(11.6)
(4.0)
239.2
(1.6)
237.6
29.4
268.6
2.4
0.8
31.8
269.4
Tennent’s
Property, plant & equipment
Brands & other intangible assets
Inventories
Trade & other receivables – current
Trade & other receivables – non current
Trade & other payables
Deferred tax assets
Net identifiable assets and liabilities acquired
Goodwill arising on acquisition
Total consideration
Gaymers
Property, plant & equipment
Brands & other intangible assets
Inventories
Trade & other receivables – current
Trade & other payables
Provisions
Deferred tax liabilities
Net identifiable assets and liabilities acquired
Goodwill arising on acquisition
Total consideration
Total
Property, plant & equipment
Brands & other intangible assets
Inventories
Trade & other receivables – current
Trade & other receivables – non current
Trade & other payables
Provisions
Deferred tax liabilities (net)
Net identifiable assets and liabilities acquired
Goodwill arising on acquisition
Total consideration
9 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
12. PROPERTy, PLANT & EQUIPMENT
Group
Cost or valuation
At 1 March 2010
Translation adjustment
Additions
Disposals
Disposal of Spirits & Liqueurs
At 28 February 2011
Translation adjustment
Additions
Disposals
Disposal of Northern Ireland wholesaling business
Revaluation of property, plant & machinery
At 29 February 2012
Depreciation
At 1 March 2010
Translation adjustment
Charge for the year
Disposals
Disposal of Spirits & Liqueurs
At 28 February 2011
Translation adjustment
Charge for the year
Disposals
Disposal of Northern Ireland wholesaling business
At 29 February 2012
Net book value
At 29 February 2012
At 28 February 2011
Freehold
land &
Motor
vehicles
& other
Plant &
buildings machinery equipment
€m
€m
€m
72.3
2.8
-
-
-
157.7
2.1
4.0
-
(7.7)
65.8
1.0
15.2
(1.5)
(0.7)
Total
€m
295.8
5.9
19.2
(1.5)
(8.4)
75.1
156.1
79.8
311.0
0.6
0.2
-
(0.8)
(2.8)
0.9
6.2
(0.3)
-
(0.9)
1.0
12.2
(0.9)
(1.1)
-
2.5
18.6
(1.2)
(1.9)
(3.7)
72.3
162.0
91.0
325.3
5.2
0.1
1.1
-
-
6.4
-
1.1
-
-
67.2
-
11.4
-
(5.2)
36.2
0.1
8.7
(0.3)
(0.7)
108.6
0.2
21.2
(0.3)
(5.9)
73.4
44.0
123.8
0.2
9.7
(0.1)
-
0.6
9.4
(0.2)
(1.0)
0.8
20.2
(0.3)
(1.0)
7.5
83.2
52.8
143.5
64.8
78.8
38.2
181.8
68.7
82.7
35.8
187.2
No depreciation is charged on freehold land, which had a book value of €9.3m at 29 February 2012 (28 February 2011: €12.7m).
Depreciated replacement cost – 28 February 2011
An internal valuation was undertaken of all property, plant & machinery assets at 28 February 2011 that were valued on a
Fair Value basis. As part of this valuation the Directors considered land values, projected asset utilisations, changes in useful
lives and obsolescence. The valuations resulted in no revaluation of this property, plant & machinery.
Depreciated replacement cost – 29 February 2012
The Group engaged external valuers Ronan Diamond BSc (Hons) MSCSI MRICS and Brian Gilson, BSc (Surv) MSCSI
MRICS MCI Arb - Lisney to value its freehold properties in ROI; David Fawcett, FRICS RICS Registered Valuer - Sanderson
Weatherall to value its plant & machinery in ROI, and, Timothy Smith BSc MRICS RICS Registered Valuer and Joseph ML
Funtek BSc MRICS RICS Registered Valuer - Gerald Eve to value both its freehold properties and plant & machinery in
the UK as at 29 February 2012. The valuations were in accordance with the requirements of the RICS Valuation Standards,
seventh edition and the International Valuation Standards.
9 3
NOTES - CONTINUED
Forming part of the financial statements
12. PROPERTy, PLANT & EQUIPMENT - CONTINUED
The valuation of ROI property was on the basis of market value, defined as ‘the estimated amount for which a property
should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction, after
proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion’ and was subject to the
assumption that the property be sold as part of a continuing business. IAS 16 Property, Plant and Equipment prescribes
that where there is no market based evidence of Fair Value because of the specialist nature of the item of property, plant
and equipment and the item is rarely sold, except as part of a continuing business, an entity may need to estimate Fair
Value using an income or a Depreciated Replacement Cost approach to valuation. The valuer’s opinion of Fair Value of the
ROI properties was primarily derived using comparable recent market transactions on an arm’s-length basis while the Fair
Value of those in GB was derived based on the Depreciated Replacement Cost approach to valuation in light of the lack of
comparative recent market transactions.
In view of the specialised nature of the Group’s plant & machinery assets and the lack of comparable market evidence of
similar plant being sold as a ‘going concern’, a Depreciated Replacement Cost approach was used to assess a Fair Value of
the Group’s plant & machinery assets. This methodology takes a gross current replacement cost for each class of plant &
machinery and applies a depreciation factor to reflect both physical and functional obsolescence. An economic obsolescence
factor is then applied to the net current replacement cost. This factor takes into account the anticipated capacity utilisation
of plant relative to total available production capacity. The significant additional assumptions applied in valuing the plant &
machinery include useful lives and asset utilisations, the following useful lives were attributed to the assets:-
Asset category
Tanks
Process equipment
Bottling & packaging equipment
Process automation
Useful life
30 - 35 years
20 years
15 - 20 years
10 years
Following the valuation exercise, the carrying value of land was reduced as outlined below and the resulting loss of €3.4m
was debited directly to a revaluation reserve within equity (€3.0m) to the extent that it reduced a previously recognised gain
and to the income statement (€0.4m) to the extent it arose on revaluation and there were no previously recognised gains in
the revaluation reserve in respect of previous revaluations of that asset.
An increase in the carrying value of buildings in Glasgow of €1.3m was credited directly to a revaluation surplus reserve within
equity while the reduction in the carrying value of buildings in Clonmel and Shepton Mallet of (€0.7m) was recognised directly
in the income statement as there were no previously recognised gains in the revaluation reserve by which to offset. The carrying
value of plant & machinery was reduced and the resulting loss of (€0.9m) was recognised in the income statement.
Carrying value at 29 February 2012 post revaluation
Carrying value at 29 February 2012 pre revaluation
(Loss)/gain on revaluation
Classified within:
Income statement
Other comprehensive income
Loss)/gain on revaluation
Company
The Company has no property, plant & equipment.
Land
€m
9.3
12.7
(3.4)
Plant &
Buildings machinery
€m
78.8
79.7
(0.9)
€m
55.5
54.9
0.6
Total
€m
143.6
147.3
(3.7)
(0.4)
(3.0)
(0.7)
1.3
(0.9)
-
(2.0)
(1.7)
(3.4)
0.6
(0.9)
(3.7)
9 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
13. GOODWILL & INTANGIBLE ASSETS
Cost
At 1 March 2010
Fair value adjustment (note 11)
Disposal of Spirits & Liqueurs (note 8)
Translation adjustment
At 28 February 2011
Translation adjustment
Acquisition of Hornsby’s cider brand
At 29 February 2012
Amortisation
At 1 March 2010
Charge for the year
At 28 February 2011
Charge for the year
At 29 February 2012
Net book value
At 29 February 2012
At 28 February 2011
Goodwill
€m
Brands
€m
Other
intangible
assets
€m
424.0
2.4
(49.6)
1.3
82.1
-
-
4.5
378.1
86.6
0.4
-
1.6
16.6
1.6
-
-
0.1
1.7
0.1
-
Total
€m
507.7
2.4
(49.6)
5.9
466.4
2.1
16.6
378.5
104.8
1.8
485.1
-
-
-
-
-
-
-
-
-
-
-
0.1
0.1
0.1
0.2
-
0.1
0.1
0.1
0.2
378.5
104.8
1.6
484.9
378.1
86.6
1.6
466.3
Goodwill
Goodwill has been attributed to operating segments (as identified under IFRS 8 Operating Segments) as follows:-
Cost
At 1 March 2010
Disposal of Spirits & Liqueurs
Fair value adjustment
Translation adjustment
At 28 February 2011
Cider
- ROI
€m
116.5
-
-
-
116.5
Cider
- GB
€m
190.8
-
6.7
0.5
198.0
Cider
-NI
€m
19.6
-
-
-
19.6
21.9
-
-
-
21.9
Translation adjustment
-
0.2
-
-
At 29 February 2012
116.5
198.2
19.6
21.9
49.6
(49.6)
-
-
-
-
-
25.6
-
(4.3)
0.8
22.1
424.0
(49.6)
2.4
1.3
378.1
0.2
0.4
22.3
378.5
Cider
-Export
€m
Spirits &
Liqueurs
€m
Tennent’s
€m
Total
€m
Goodwill consists both of goodwill capitalised under Irish GAAP which at the transition date to IFRS was treated as deemed
cost and goodwill that arose on the acquisition of businesses since that date which was capitalised at cost and represents
the synergies arising from cost savings and the opportunity to utilise the extended distribution network of the Group to
leverage the marketing of acquired products.
In line with IAS 36 Impairment of Assets, goodwill is allocated to each of the cash generating units expected to benefit from
the combinations synergies. The cash generating units represent the lowest level within the Group at which goodwill is
monitored for internal management purposes. These units are not larger than the Group’s operating segments determined
in accordance with IFRS 8 Operating Segments. The fair value of goodwill previously reported within Tennent’s Ireland and
Tennent’s GB is now consolidated and reported within the Tennent’s operating segment.
As permitted under IFRS 3 (2004) Business Combinations, the provisional valuations assigned to the assets and liabilities
acquired were amended resulting in an increase to the value of goodwill of a net €2.4m in the prior year. The amendments
to the originally assigned fair values giving rise to this adjustment are set out in note 11 and relate to the costs of acquisition
and the fair value of trade receivables, accruals and provisions.
All goodwill is regarded as having an indefinite life and is not subject to amortisation under IFRS but is subject to an annual
impairment assessment.
9 5
NOTES - CONTINUED
Forming part of the financial statements
13. GOODWILL & INTANGIBLE ASSETS - CONTINUED
Brands
On 8 November 2011, the Group completed the acquisition of the Hornsby’s cider brand from E & J Gallo Winery comprising
the global intellectual property rights to the Hornsby’s brand. In addition, the Group acquired inventory valued at €1.7m. The
Group entered into a Transitional Services Arrangement with E & J Gallo Winery for the production and distribution of the
brand for a period of one year and for the provision of all sales, commercial, accounting and back office services for a period
of seven months.
The transaction was completed for an initial cash consideration of €16.4m ($22.5m), including a payment of €1.7m ($2.4m)
equating to a normal level of inventory. Costs totalling €0.2m were incurred in acquiring the brand. The final valuation of inventory
acquired will be determined at the end of the transitional services agreement. In addition, contingent consideration of up to
€3.6m (US$5.0m) is payable subject to the performance of the brand during a transitional period. In line with the Agreement, the
amount of contingent consideration payable is based on volume performance with €1.8m (euro equivalent of $2.5m at year end
date) payable if the brand continues to perform in line with recent trends. If the brand outperforms a volume ratchet mechanism
is linked to a payment range of €1.8m to €3.6m (euro equivalent of $2.5m to $5.0m at year end date). The Directors have assumed
the amount payable to be €1.8m ($2.5m) based on their expectation of performance in the transitional period.
Hornsby’s cider brand
Brand
Inventories
Total consideration
Satisfied by:
Cash
Contingent consideration (euro equivalent at date of acquisition)
Acquisition costs paid
Total consideration
Brands have been attributed to operating segments (as identified under IFRS 8 Operating Segments) as follows:-
At 1 March 2010
Translation adjustment
At 28 February 2011
Translation adjustment
Acquisition of Hornsby’s cider brand
Cider
- GB
€m
10.8
0.6
11.4
0.2
-
Cider
- Export
€m
Tennent’s
€m
-
-
-
0.3
16.6
71.3
3.9
75.2
1.1
-
€m
16.6
1.7
18.3
16.4
1.7
0.2
18.3
Total
€m
82.1
4.5
86.6
1.6
16.6
At 29 February 2012
11.6
16.9
76.3
104.8
Capitalised brands include the Tennent’s beer brands and a number of cider brands, including Gaymers, Blackthorn and
Olde English acquired during the financial year ended 28 February 2010 and the Hornsby’s cider brand acquired during the
current financial year. The Tennent’s and Gaymers brands were valued at fair value on the date of acquisition in accordance
with the requirements of IFRS 3 Business Combinations (2004) by independent professional valuers. The Hornsby’s cider
brand was valued at cost.
In line with IAS 36 Impairment of Assets, and as discussed above, the fair value of the Tennent’s beer brand which was
previously reported within Tennent’s Ireland and Tennent’s GB is now consolidated and reported within the Tennent’s
operating segment.
Capitalised brands are regarded as having indefinite useful economic lives and therefore have not been amortised. The
brands are protected by trademarks, which are renewable indefinitely in all major markets where they are sold and it is the
Group’s policy to support them with the appropriate level of brand advertising. In addition, there are not believed to be any
legal, regulatory or contractual provisions that limit the useful lives of these brands. Accordingly, the Directors believe that it
is appropriate that the brands be treated as having indefinite lives for accounting purposes.
Other intangible assets
Other intangible assets comprise 20 year distribution rights for third party beer products. These were valued at fair value on the
date of acquisition in accordance with the requirements of IFRS 3 Business Combinations (2004) by independent professional
valuers. Other intangible assets have finite lives and are subject to amortisation on a straight line basis over the length of the
distribution arrangements. The amortisation charge for the year ended 29 February 2012 is €0.1m (2011: €0.1m).
9 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
13. GOODWILL & INTANGIBLE ASSETS - CONTINUED
Impairment testing
To ensure that goodwill and brands considered to have an indefinite useful economic life are not carried at above their
recoverable amount, impairment reviews are performed comparing the carrying value (‘value-in-use’) of the assets with their
recoverable amount using value-in-use computations. Impairment testing is performed annually or more frequently if there
is an indication that the carrying amount may not be recoverable.
For goodwill, the recoverable amount is calculated in respect of each business segment (which may comprise of more than
one cash generating unit). The business segments represents the lowest levels within the Group at which the associated
goodwill and indefinite life brands are monitored for management purposes and are not larger than the reported segments
determined in accordance with IFRS 8 Operating Segments.
Value-in-use is calculated on the basis of estimated future cash flows discounted to present value and terminal values
calculated on the assumption that cash flows continue in perpetuity. The key assumptions used in the value-in-use
computations are:-
•
•
Expected volume, net revenue and operating profit growth rates - cash flows for each business segment are based on
detailed financial budgets and plans, formally approved by the Board, for years one to three,
Long term growth rate - cash flows after the first three years were extrapolated using a long term growth rate, on the
assumption that cash flows for the first three years will increase at a nominal growth rate in perpetuity,
• Discount rate.
The key assumptions used in the value-in-use computations were based on management assessment of anticipated
market conditions for each segment. A terminal growth rate of 2.5% (2011: 2.5%) in perpetuity was assumed based on an
assessment of the likely long term growth prospects for the sectors in which the Group operates. The resulting cash flows
were discounted to present value using a range of discount rates between 8-12% (2011: 8-12%).
No impairment losses were recognised by the Group in the current or previous financial year.
Sensitivity analysis
The impairment testing carried out at 29 February 2012 identified significant headroom in the recoverable amount of the
brands and goodwill compared to their carrying values in all business segments. The key sensitivities for the impairment
testing are net revenue and operating profit growth assumptions, discount rates applied to the resulting cashflows and the
expected long term growth rates. No material adjustments to the assumptions underlying the impairment testing models
applied would result in any foreseeable risk of an impairment arising.
14. FINANCIAL ASSETS
Company
Equity investment in subsidiary undertakings at cost
At beginning of year
Capital contribution in respect of share options granted to employees of subsidiary undertakings
At end of year
2012
€m
2011
€m
966.2
2.6
962.2
4.0
968.8
966.2
The total expense of €2.6m (2011: €4.0m) attributable to share options granted to employees of subsidiary undertakings has
been included as a capital contribution in financial assets.
In the opinion of the Directors, the shares in the subsidiary undertakings are worth at least the amounts at which they are
stated in the balance sheet. Details of subsidiary undertakings are set out in note 28.
15. INVENTORIES
Group
Raw materials & consumables
Finished goods & goods for resale
Total inventories at lower of cost and net realisable value
2012
€m
29.0
17.1
2011
€m
26.7
14.0
46.1
40.7
Inventory write-downs recognised as an expense within operating costs amounted to €0.3 m (2011: €1.1m). Previously impaired
inventory recovered during the financial year and recognised as exceptional income (note 5) amounted to €0.7m (2011: €0.2m).
9 7
NOTES - CONTINUED
Forming part of the financial statements
16. TRADE & OTHER RECEIVABLES
Amounts falling due within one year:
Trade receivables
Advances to customers
Prepayments and other receivables
Amounts falling due after one year:
Advances to customers
Amounts due from Group undertakings
Total
Group
Company
2012
€m
2011
€m
2012
€m
2011
€m
79.8
5.2
8.4
91.0
4.4
10.1
93.4
105.5
-
-
-
-
-
-
-
-
19.5
-
20.0
-
-
30.6
-
24.9
19.5
20.0
30.6
24.9
112.9
125.5
30.6
24.9
The book value of trade & other receivables approximates their fair value on the basis that all amounts are falling due within
one year.
The aged analysis of trade receivables and advances to customers analysed between amounts that were neither past due nor
impaired and amounts past due at 29 February 2012 and 28 February 2011 were as follows:-
Group
Neither past due nor impaired
Past due
Past due 0-30 days
Past due 31-120 days
Past due 121-365 days
More than one year
Total
Gross Impairment
2012
2012
€m
€m
Gross
2011
€m
Impairment
2011
€m
101.8
-
109.1
-
1.9
3.0
1.1
4.3
(0.8)
(1.8)
(1.1)
(3.9)
2.2
2.3
1.6
3.1
-
(0.5)
(1.3)
(1.1)
112.1
(7.6)
118.3
(2.9)
All trade & other receivables and advances to customers are monitored on an on-going basis for evidence of impairment;
assessments are undertaken for individual accounts. A provision for impairment is created where the Group is not able to
collect all amounts due in accordance with the original terms of the agreement with the customer. Balances charged to
the impairment provision are generally writen off when there is no expectation of recovering additional cash. The exposure
highlighted above for amounts past due more than one year and not impaired predominantly relates to advances to
customers which are adequately secured.
Trade receivables are on average receivable within 41 days (2011: 42 days) of the balance sheet date, are unsecured and
are not interest-bearing. All advances to customers acquired on acquisition of the Tennent’s business were recorded at
fair value; the current year balance includes the creation of an impairment provision in relation to advances to customers
considered receivable in a period outside that originally contracted. The movement in the allowance for impairment in
respect of trade receivables and advances to customers during the year was as follows:-
Group
At beginning of year
Recovered during the year
Provided during the year
De-recognised on disposal
Written off during the year
Translation adjustment
At end of year
9 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
2012
€m
2011
€m
2.9
(0.3)
6.3
(0.2)
(1.2)
0.1
1.6
(0.1)
1.9
(0.1)
(0.4)
-
7.6
2.9
17. TRADE & OTHER PAyABLES
Trade payables
Payroll taxes & social security
VAT
Excise duty
Accruals
Amounts due to Group undertakings
Total
Group
Company
2012
€m
44.3
1.9
4.8
11.7
79.2
-
2011
€m
30.3
1.3
4.2
16.2
87.1
-
2012
€m
-
-
-
-
0.2
10.0
141.9
139.1
10.2
2011
€m
-
-
-
-
0.4
-
0.4
The Group’s exposure to currency and liquidity risk related to trade & other payables is disclosed in note 23.
Company
The Company has guaranteed the liabilities of its subsidiary companies incorporated in the Republic of Ireland. As at 29
February 2012, the Directors consider these to be in the nature of insurance contracts and do not consider it probable that
the Company will have to make a payment under these guarantees and as such discloses them as a contingent liability as
detailed in note 26.
18. PROVISIONS
At beginning of year
Translation adjustment
Arising on acquisition
Charged during the year
Released during the year
Utilised during the year
At end of year
Current
Non-current
Restructuring
2012
€m
Onerous
lease
2012
€m
2.1
-
-
4.6
-
(4.7)
13.1
0.1
-
-
-
(0.6)
Other
2012
€m
0.5
0.1
1.7
0.6
(0.2)
-
Total
2012
€m
15.7
0.2
1.7
5.2
(0.2)
(5.3)
2.0
12.6
2.7
17.3
5.8
11.5
17.3
Total
2011
€m
12.6
0.6
6.3
5.1
(0.6)
(8.3)
15.7
4.2
11.5
15.7
Restructuring
The restructuring provision relates to severance costs arising from the Group’s ongoing reorganisation programme and is
expected to be utilised in the next financial year.
Onerous lease
The opening onerous lease provision relates to both an onerous lease agreement to which the Group remains committed
following the consolidation of the Group’s Dublin offices into a single location in 2009, and two onerous leases in relation to
warehousing facilities acquired as part of the acquisition of the Gaymers cider business in 2010. The onerous leases expire in
2013, 2017 and 2026.
Other
Other provisions primarily relate to a provision for the Group’s exposure to employee and third party insurance claims. Under
the terms of employer and public liability insurance policies, the Group bears a portion of the cost of each claim up to the
specified excess. The provision is calculated based on the expected portion of settlement costs to be borne by the Group in
respect of specific claims arising before the balance sheet date.
Also included within other provisions in the current year is a litigation provision of €0.6m and a provision for contingent
consideration of €1.8m (euro equivalent of $2.5m at year end date) payable to E & J Gallo Winery on the seven month
anniversary of the completion of the acquisition of the Hornsby’s brand, the ultimate contingent consideration payable is,
as outlined in note 13, based on sales volume performance.
9 9
NOTES - CONTINUED
Forming part of the financial statements
19. INTEREST BEARING LOANS & BORROWINGS
Group and Company
Non-current liabilities
Unsecured bank loans repayable by one repayment on maturity
Current liabilities
Unsecured bank loans repayable by one repayment on maturity
Unsecured bank loans repayable by instalments
Total borrowings
2012
€m
2011
€m
-
99.8
60.0
-
-
35.2
60.0
135.0
Unamortised issue costs are netted against outstanding bank loans and are being amortised to the income statement on an
effective interest rate basis. The value of unamortised issue costs at 29 February 2012 was nil (2011: €0.3m)
Terms and debt repayment schedule
Currency
Nominal
rates of
interest
year of
maturity
2012
Carrying
value
€m
2011
Carrying
value
€m
Unsecured bank loans
Unsecured bank loans
Euro
GBP
Euribor + 0.35%
Libor + 2.75%
2012
2011
60.0
-
100.0
35.3
60.0
135.3
Borrowing facilities
The Group manages its borrowing ability by entering into committed loan facility agreements.
In February 2012, the Group entered into a committed €250.0m multi-currency five year syndicated revolving loan facility with
seven banks, including Bank of Ireland, Bank of Scotland, Barclays Bank, Danske Bank, HSBC, Rabobank, and Ulster Bank,
repayable in a single instalment on 28 February 2017. The facility agreement provides for a further €100.0m in the form of
an uncommitted accordion facility and permits the Group to avail of further financial indebtedness, excluding working capital
and guarantee facilities, to a maximum value of €150.0m. Consequently, the Group is permitted, under the terms of the
agreement, to have debt capacity of €500.0m.
Under the terms of the agreement, the Group must pay a commitment fee based on 40% of the applicable margin on
undrawn committed amounts and variable interest on drawn amounts based on variable Euribor/Libor interest rates plus a
margin, the level of which is dependent on the net debt:EBITDA ratio, plus an utilisation fee, the level of which is dependent
on percentage utilisation. The Group may select an interest period of one, two, three or six months. There were no drawn
funds under this facility as at 29 February 2012.
During the financial year, the Group, using surplus cash resources, repaid and cancelled all funds (£30.0m) drawn under its
maturing sterling revolving loan facility and reduced drawings under its primary euro revolving loan facility by €40.0m. The
sterling loan facility matured on 30 June 2011, while the euro loan facility, although not maturing until 28 May 2012, was
voluntarily repaid in full and cancelled post year end, on 30 March 2012.
During the previous financial year, and in accordance with the terms of the euro facility agreement whereby net proceeds,
in excess of an agreed de minimis, must be applied to repay outstanding loans, net disposal proceeds of €245.0m arising
from the disposal of the Group’s Spirits & Liqueurs business, were used to part repay the facility and the available committed
facility was cancelled by the same amount. In addition, voluntary repayments of €55.0m and €30.0m were completed in
January and February 2011 respectively from surplus cash resources.
All bank loans are guaranteed by a number of the Group’s subsidiary undertakings. The loan facility agreements allow the
early repayment of debt without incurring additional charges or penalties. All bank loans are repayable in full on change of
control of the Group.
The Group’s debt facilities (2007 euro and 2012 multi-currency facilities) incorporate two financial covenants:
•
Interest cover: The ratio of EBITDA to net interest for a period of 12 months ending on each half year date will not be less
than 3.5:1
Net debt/EBITDA: The ratio of net debt on each half year date to EBITDA for a period of 12 months ending on a half year
date will not exceed 3.5:1
•
Further information about the Group’s exposure to interest rate, foreign currency and liquidity risk is disclosed in note 23.
1 0 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
20. ANALySIS OF NET DEBT
Group
Interest bearing loans & borrowings
Cash & cash equivalents
Interest rate swaps (note 23)
1 March Translation
2011 adjustment
€m
€m
Cash
flow
€m
Non-cash 29 February
2012
€m
changes
€m
135.0
(128.7)
6.3
2.0
8.3
(1.7)
0.6
(1.1)
(73.6)
(0.2)
(73.8)
-
(2.4)
0.3
-
0.3
0.4
60.0
(128.3)
(68.3)
-
(1.1)
(76.2)
0.7
(68.3)
1 March Translation
2010 adjustment
€m
€m
Cash
flow
€m
Non-cash 28 February
2011
€m
changes
€m
Group
Interest bearing loans & borrowings
Cash & cash equivalents
478.4
(113.5)
364.9
3.3
(0.7)
2.6
(348.2)
(14.5)
(362.7)
1.5
-
1.5
Interest rate swaps (note 23)
4.9
-
3.0
(5.9)
369.8
2.6
(359.7)
(4.4)
The non-cash changes to the Group’s debt relate to the amortisation of issue costs.
135.0
(128.7)
6.3
2.0
8.3
Company
Interest bearing loans & borrowings
Cash & cash equivalents
Interest rate swaps (note 23)
Company
Interest bearing loans & borrowings
Interest rate swaps (note 23)
1 March Translation
2011 adjustment
€m
€m
Cash
flow
€m
Non-cash 29 February
2012
€m
changes
€m
135.0
-
135.0
(1.7)
-
(1.7)
(73.6)
(9.3)
(82.9)
2.0
-
(2.4)
0.3
-
0.3
0.4
60.0
(9.3)
50.7
-
137.0
(1.7)
(85.3)
0.7
50.7
1 March Translation
2010 adjustment
€m
€m
Cash
flow
€m
Non-cash 28 February
2011
€m
changes
€m
478.4
4.9
3.3
-
(348.2)
3.0
1.5
(5.9)
135.0
2.0
483.3
3.3
(345.2)
(4.4)
137.0
The non-cash changes to the Group’s debt relate to the amortisation of issue costs.
21. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Group
Property, plant & equipment
Provision for ROI trade related items
Provision for UK trade related items
Retirement benefit obligations
Derivative financial instruments
2012
2011
Assets
€m
Liabilities
€m
Net assets/
liabilities
€m
Assets
€m
Liabilities
€m
Net assets/
liabilities
€m
4.5
-
-
1.9
0.1
6.5
-
-
(7.2)
-
-
4.5
-
(7.2)
1.9
0.1
(7.2)
(0.7)
5.9
0.6
-
2.0
0.2
8.7
-
-
(5.9)
-
-
5.9
0.6
(5.9)
2.0
0.2
(5.9)
2.8
1 0 1
NOTES - CONTINUED
Forming part of the financial statements
21. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES - CONTINUED
Company
Derivative financial instruments
Interest free loans fair value adjustment
Analysis of movement in net deferred tax assets/liabilities
Group
Property, plant & equipment
Provision for ROI trade related items
Provision for UK trade related items
Retirement benefit obligations
Derivative financial instruments
Group
Property, plant & equipment
Provision for ROI trade related items
Provision for UK trade related items
Retirement benefit obligations
Derivative financial instruments
Company
Derivative financial instruments
Interest free loans fair value adjustment
Company
Derivative financial instruments
Interest free loans fair value adjustment
There are no unrecognised deferred tax liabilities.
2012
2011
Assets
€m
Liabilities
€m
Net assets/
liabilities
€m
Assets
€m
Liabilities
€m
Net assets/
liabilities
€m
-
-
-
-
-
-
-
-
-
0.2
0.4
0.6
-
-
-
0.2
0.4
0.6
1 March
2011
€m
Recognised
in income
statement
€m
Recognised
in other
Translation
adjustment
€m
comprehensive 29 February
2012
€m
income
€m
5.9
0.6
(5.9)
2.0
0.2
(1.4)
(0.6)
(1.2)
(2.5)
-
-
-
(0.1)
-
-
-
-
-
2.4
(0.1)
4.5
-
(7.2)
1.9
0.1
2.8
(5.7)
(0.1)
2.3
(0.7)
1 March
2010
€m
Recognised
in income
statement
€m
Recognised
in other
Translation
adjustment
€m
comprehensive 28 February
2011
€m
income
€m
7.6
1.2
(4.6)
2.8
0.7
7.7
(1.7)
(0.6)
(1.1)
(0.8)
-
(4.2)
-
-
(0.2)
-
-
(0.2)
-
-
-
-
(0.5)
(0.5)
5.9
0.6
(5.9)
2.0
0.2
2.8
1 March
2011
€m
Recognised
in income
statement
€m
Recognised
in other
comprehensive 29 February
2012
€m
income
€m
0.2
0.4
0.6
-
(0.4)
(0.4)
(0.2)
-
(0.2)
-
-
-
1 March
2010
€m
Recognised
in income
statement
€m
Recognised
in other
comprehensive 28 February
2011
€m
income
€m
0.5
8.0
8.5
-
(7.6)
(7.6)
(0.3)
-
(0.3)
0.2
0.4
0.6
1 0 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
22. RETIREMENT BENEFIT OBLIGATIONS
The Group operates a number of defined benefit pension schemes for certain employees in the Republic of Ireland (ROI) and in
Northern Ireland, all of which provide pension benefits based on final salary and the assets of which are held in separate trustee
administered funds. The Group provides permanent health insurance cover for the benefit of its employees and separately charges
this to the income statement.
The pension scheme assets are held in separate trustee administered funds to meet long-term pension liabilities to past and
present employees. The trustees of the funds are required to act in the best interest of the funds’ beneficiaries. The appointment
of trustees to the funds is determined by the schemes’ trust documentation. The Group has a policy in relation to its principal staff
pension fund that members of the fund should nominate half of all fund trustees.
All schemes are closed to new members since April 2007. There are now no active members in the Executive defined benefit
pension scheme (FY2011: 3 active members), while active members of the Staff defined benefit pension scheme represent less
than 10% of total membership. There are 9 active members in the NI scheme (FY2011: 33 active members). The Group’s ROI
defined benefit pension reform programme concluded during the financial year with the Pensions Board issuing a directive under
Section 50 of the Pensions Act 1990 to remove the mandatory pension increase rule, which guaranteed 3% per annum increases to
certain pensions in payment, and to replace it with guaranteed pension increases of 2% per annum for each year 2012 to 2014 and
thereafter for all future pension increases to be awarded on a discretionary basis.
Actuarial valuations – funding requirements
Independent actuarial valuations of the defined benefit schemes are carried out on a triennial basis using the attained age
method. The funding requirements in relation to the Group’s ROI defined benefit schemes are assessed at each valuation date
and are implemented in accordance with the advice of the actuaries. The most recently completed formal actuarial valuations of
the main schemes were carried out on 1 January 2009 and the actuary, Mercer (Ireland) Limited, submitted Actuarial Funding
Certificates to the Pensions Board confirming that the Schemes did not satisfy the Minimum Funding Standard at that date. Given
that the removal of guaranteed pension increases would not correct this situation, Funding Proposals were submitted to, and
approved by the Pensions Board on 23 February 2012, which the Directors believe will enable the schemes to meet the Minimum
Funding Standard by 31 December 2016. The actuarial valuations are not available for public inspection; however the results of the
valuations are advised to members of the various schemes.
The Trustees were required to update the actuarial valuations and funding requirements of both ROI pension schemes for the
Funding Proposal submissions. The Funding Proposals commit the Group to contributions of 14% of Pensionable Salaries to fund
future pension accrual of benefits (previously 38.1% of Pensionable Salaries), a deficit contribution of €3.4m and an additional
supplementary deficit contribution of €1.9m for which the Group reserves the right to reduce or terminate if on consultation with
the Trustees, and if the Scheme Actuary advises that it is no longer required due to a correction in market conditions.
Method and assumptions
Independent actuaries, Mercer (Ireland) Limited, have employed the projected unit credit method to determine the present value of
the defined benefit obligations arising and the related current service cost.
The financial assumptions that have the most significant impact on the results of the actuarial valuations are those relating to
the discount rate used to convert future pension liabilities to current values and the rate of increase in salaries. These and other
assumptions used to determine the retirement benefits obligations and service cost under IAS 19 Employee Benefits are set out
below.
Mortality rates also have a significant impact on the actuarial valuations, and as the number of deaths within the scheme have
been too small to analyse and produce any meaningful scheme-specific estimates of future levels of mortality, the rates used
have been based on the most up-to-date mortality tables, PNL00 62% (males) and PNL00 70% (females), with age ratings and
loading factors to allow for future mortality improvements. These tables conform to best practice. The growing trend for people to
live longer and the expectation that this will continue has been reflected in the mortality assumptions used for this valuation as
indicated below. This assumption will continue to be monitored in light of general trends in mortality experience. Based on these
tables, the assumed life expectations on retirement are:
Future life expectations at age 65
Current retirees – no allowance for future improvements
Future retirees – with allowance for future improvements
2012
2011
No of years No of years
Male
Female
Male
Female
23.2
24.6
24.7
25.8
19.5
21.8
24.3
26.3
Scheme liabilities:
The average age of active members is 42 and 49 years for the ROI Staff and the UK defined benefit pension schemes
respectively (the executive defined benefit pension scheme has no active members), while the average duration of liabilities
ranges from 14 to 22 years.
1 0 3
NOTES - CONTINUED
Forming part of the financial statements
22. RETIREMENT BENEFIT OBLIGATIONS- CONTINUED
The principal long-term financial assumptions used by the Group’s actuaries in the computation of the defined benefit
liabilities arising on pension schemes as at 29 February 2012 and 28 February 2011 are as follows:
Salary increases
Increases to pensions in payment
Discount rate
Inflation rate
2012
2011
ROI
UK
ROI
UK
0.0% - 3.0%
2.0% - 2.25%
4.7% - 4.9%
2.0%
3.7%
2.5%
4.75%
3.0%
0.0% - 3.0%
3.0%
5.3% - 5.5%
2.0%
4.2%
2.5%
5.5%
3.5%
Scheme assets:
The long-term rates of return expected at 29 February 2012 and 28 February 2011, determined in conjunction with the Group’s
actuaries and based on market expectations at the beginning of the financial year for investment returns over the entire life of
the related obligation, analysed by the class of investments in which the schemes’ assets are invested, are as follows:
Equity
Bonds
Property
Cash
Alternatives
2012
2011
ROI
UK
ROI
UK
6.90%
4.40%
5.90%
2.50%
5.90%
6.25%
3.25%
-
0.50%
-
7.00%
4.50%
6.00%
2.50%
-
7.43%
4.43%
-
0.50%
-
The assumption used is the average of the above assumptions, appropriate to the individual asset classes, weighted by the
proportion of the assets in the particular asset class. The investment return on bonds has been based on market yield of
the bond fund’s benchmark index at the balance sheet date. The assumed investment return on equities allows for a 3.8%
(2011:3.1%) equity risk premium over the 30 year government bond yield.
a.
Impact on Group income statement
Analysis of defined benefit pension expense:
Current service cost
Past service cost
Curtailment gain
Interest on scheme liabilities
Expected return on scheme assets
ROI
€m
0.6
(14.8)
-
8.1
(7.1)
2012
UK
€m
0.1
-
(0.1)
0.2
(0.3)
Total
€m
ROI
€m
0.7
(14.8)
(0.1)
8.3
(7.4)
1.0
-
(1.9)
8.2
(6.6)
2011
UK
€m
0.2
-
(0.1)
0.2
(0.2)
Total
€m
1.2
-
(2.0)
8.4
(6.8)
Total (income)/expense recognised in income statement
(13.2)
(0.1)
(13.3)
0.7
0.1
0.8
Analysis of amount recognised in other comprehensive income
2012
UK
€m
ROI
€m
Total
€m
ROI
€m
2011
UK
€m
Total
€m
ROI
€m
2010
UK
€m
Total
€m
ROI
€m
2009
UK
€m
Total
€m
ROI
€m
2008
UK
€m
Total
€m
Actual return less
expected return on
scheme assets
Experience gains
and losses on
scheme liabilities
Effect of changes
in assumptions on
value of liabilities
(0.8)
0.3
(0.5)
(0.9)
0.2
(0.7) 15.3
0.6
15.9
(44.0)
(0.8)
(44.8)
(26.9)
(1.1)
(28.0)
(0.8)
-
(0.8)
1.1
-
1.1
3.2
0.4
3.6
0.1
(0.2)
(0.1)
4.4
(0.4)
4.0
(17.3)
(0.4) (17.7)
(0.1)
(0.1)
(0.2)
(2.0)
(0.8)
(2.8)
3.2
0.1
3.3
22.6
3.4
26.0
Total
(18.9)
(0.1) (19.0)
0.1
0.1
0.2
16.5
0.2
16.7
(40.7)
(0.9)
(41.6)
0.1
1.9
2.0
Scheme assets
Scheme liabilities
Deficit in scheme
Surplus in scheme
142.9
(158.2)
(15.3)
-
5.3 148.2 136.9
(5.1) (163.3) (151.9)
-
(15.3) (15.0)
0.2
0.2
-
4.3 141.2 131.5
(4.6) (156.5) (151.9)
3.1 134.6 107.3
(3.9) (155.8) (151.8)
2.2 109.5 123.8
(3.2) (155.0) (150.6)
3.3 127.1
(3.7) (154.3)
(0.3)
-
(15.3)
-
(20.4)
-
(0.8)
-
(21.2)
-
(44.5)
-
(1.0)
-
(45.5)
-
(26.8)
-
(0.4)
-
(27.2)
-
1 0 4
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
22. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
b.
Impact on Group balance sheet
The net pension liability at 29 February 2012 is analysed as follows:
Analysis of net pension deficit
Bid value of assets at end of year:
Equity(i)
Bonds
Property
Cash
Alternatives
ROI
€m
36.6
66.1
4.9
20.3
15.0
2012
UK
€m
2.6
2.6
-
0.1
-
Total
€m
ROI
€m
39.2
68.7
4.9
20.4
15.0
51.7
61.7
5.1
18.4
-
142.9
5.3
148.2
136.9
2011
UK
€m
2.1
2.1
-
0.1
-
4.3
Total
€m
53.8
63.8
5.1
18.5
-
141.2
Actuarial value of scheme liabilities
(158.2)
(5.1)
(163.3)
(151.9)
(4.6)
(156.5)
(Deficit)/surplus in the scheme
Related deferred tax asset
Net pension (deficit)/surplus
(15.3)
1.9
(13.4)
0.2
-
0.2
(15.1)
1.9
(15.0)
1.9
(0.3)
0.1
(15.3)
2.0
(13.2)
(13.1)
(0.2)
(13.3)
(i) The defined benefit pension schemes have a passive self investment in C&C Group plc of €nil (2011: €16,000).
The alternative investment category includes investments in various asset classes including equities, commodities,
currencies and hedge funds. The investments are managed by fund managers.
Reconciliation of scheme assets
Assets at beginning of year
Movement in year
Translation adjustment
Expected return on scheme assets
Actual return less expected return on scheme assets
Employer contributions
Member contributions
Benefit payments
ROI
€m
136.9
-
7.1
(0.8)
5.4
0.3
(6.0)
2012
UK
€m
4.3
0.1
0.3
0.3
0.5
-
(0.2)
Total
€m
ROI
€m
2011
UK
€m
Total
€m
141.2
131.5
3.1
134.6
0.1
7.4
(0.5)
5.9
0.3
(6.2)
-
6.6
(0.9)
6.0
0.2
(6.5)
0.2
0.2
0.2
0.6
0.1
(0.1)
0.2
6.8
(0.7)
6.6
0.3
(6.6)
Assets at end of year
142.9
5.3
148.2
136.9
4.3
141.2
The expected employer contributions to defined benefit schemes for year ending 28 February 2013 is €6.5m.
The scheme assets had the following investment profile at the year end:
Equities
Bonds
Property
Cash
Alternatives
2012
2011
ROI
NI
ROI
26%
46%
3%
14%
11%
49%
49%
-
2%
-
38%
45%
4%
13%
-
NI
50%
48%
-
2%
-
100%
100%
100%
100%
1 0 5
NOTES - CONTINUED
Forming part of the financial statements
22. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
Reconciliation of actuarial value of liabilities
Liabilities at beginning of year
Movement in year
Translation adjustment
Current service cost
Past service gain
Curt ailment gain
Interest cost on scheme liabilities
Member contributions
Actuarial loss/(gain) immediately recognised in equity
Benefit payments
ROI
€m
151.9
-
0.6
(14.8)
-
8.1
0.3
18.1
(6.0)
2012
UK
€m
4.6
0.1
0.1
-
(0.1)
0.2
-
0.4
(0.2)
Total
€m
ROI
€m
2011
UK
€m
Total
€m
156.5
151.9
3.9
155.8
0.1
0.7
(14.8)
(0.1)
8.3
0.3
18.5
(6.2)
-
1.0
-
(1.9)
8.2
0.2
(1.0)
(6.5)
0.3
0.2
-
(0.1)
0.2
0.1
0.1
(0.1)
0.3
1.2
-
(2.0)
8.4
0.3
(0.9)
(6.6)
Liabilities at end of year
158.2
5.1
163.3
151.9
4.6
156.5
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Group’s multinational operations expose it to various financial risks in the ordinary course of business that include credit
risk, liquidity risk, commodity price risk, currency risk and interest rate risk. This note discusses the Group’s exposure to
each of these financial risks, summarises the risk management strategy for managing these risks and details the accounting
treatment applied to the Group’s derivative financial instruments and hedging activities. The note is presented as follows:-
(a) Overview of the Group’s risk exposures and management strategy
(b) Financial assets and liabilities as at 29 February 2012/28 February 2011 and Determination of Fair Value
(c) Market risk
(d) Credit risk
(e) Liquidity risk
(f) Accounting for derivative financial instruments and hedging activities
(a) Overview of the Group’s risk exposures and management strategy
The most significant financial market risks that the Group is exposed to include foreign currency exchange rate risk,
commodity price fluctuations, interest rate risk and financial counterparty creditworthiness. There has been no significant
change during the financial year to either the financial risks faced by the Group or the Board’s approach to the management
of these risks.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management
framework. This is executed through various committees to which the Board has delegated appropriate levels of authority.
An essential part of this framework is the role undertaken by the audit committee, supported by the internal audit function,
and the Group Chief Financial Officer. The Board, through its Committees, has reviewed the internal control environment and
the risk management systems and process for identifying and evaluating the significant risks affecting the business and the
policies and procedures by which these risks will be managed effectively. The Board has embedded these structures and
procedures throughout the Group and considers these to be a robust and efficient mechanism for creating a culture of risk
awareness at every level of management.
The Group’s risk management programme seeks to minimise the potential adverse effects, arising from fluctuations in
financial markets, on the Group’s financial performance in a non speculative manner at a reasonable cost when economically
viable to do so. The Group achieves the management of these risks in part, where appropriate, through the use of derivative
financial instruments. All derivative financial contracts entered into are in liquid markets with credit rated parties. Treasury
activities are performed within strict terms of reference that have been approved by the Board.
1 0 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
(b) Financial assets and liabilities
The carrying and fair values of financial assets and liabilities by measurement category were as follows:
Group
29 February 2012
Financial assets:
Cash & cash equivalents
Derivative financial assets
Trade receivables
Advances to customers
Financial liabilities:
Interest bearing loans & borrowings
Derivative financial liabilities
Trade payables & accruals
Provisions
Group
28 February 2011
Financial assets:
Cash & cash equivalents
Derivative financial assets
Trade receivables
Advances to customers
Financial liabilities:
Interest bearing loans & borrowings
Derivative financial liabilities
Trade payables & accruals
Provisions
Company
29 February 2012
Financial assets:
Cash & cash equivalents
Amounts due from Group undertakings
Financial liabilities:
Interest bearing loans & borrowings
Amounts due to Group undertakings
Trade payables & accruals
Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m
Carrying
value
€m
Fair
value
€m
-
0.1
-
-
-
(0.9)
-
-
128.3
-
79.8
24.7
-
-
-
-
128.3
0.1
79.8
24.7
128.3
0.1
79.8
24.7
-
-
-
-
(60.0)
-
(141.9)
(17.3)
(60.0)
(0.9)
(141.9)
(17.3)
(60.0)
(0.9)
(141.9)
(17.3)
(0.8)
232.8
(219.2)
12.8
12.8
Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m
Carrying
value
€m
Fair
value
€m
-
0.4
-
-
-
(2.1)
-
-
128.7
-
91.0
24.4
-
-
-
-
128.7
0.4
91.0
24.4
128.7
0.4
91.0
24.4
-
-
-
-
(135.0)
-
(139.1)
(15.7)
(135.0)
(2.1)
(139.1)
(15.7)
(129.0)
(2.1)
(139.1)
(15.7)
(1.7)
244.1
(289.8)
(47.4)
(41.4)
Derivative
financial
instruments
€m
Other
financial
assets
€m
Other
financial
liabilities
€m
Carrying
value
€m
Fair
value
€m
-
-
-
-
-
-
9.3
30.6
-
-
9.3
30.6
9.3
30.6
-
-
-
(60.0)
(10.0)
(0.2)
(60.0)
(10.0)
(0.2)
(60.0)
(10.0)
(0.2)
39.9
(70.2)
(30.3)
(30.3)
1 0 7
NOTES - CONTINUED
Forming part of the financial statements
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
Derivative
financial
instruments
€m
Company
Other
financial
assets
€m
Other
financial
liabilities
€m
Carrying
value
€m
Fair
value
€m
28 February 2011
Financial assets:
Amounts due from Group undertakings
Financial liabilities:
Interest bearing loans & borrowings
Derivative financial liabilities
Accruals
-
24.9
-
24.9
24.9
-
(2.0)
-
-
-
-
(135.0)
-
(0.4)
(135.0)
(2.0)
(0.4)
(129.0)
(2.0)
(0.4)
(2.0)
24.9
(135.4)
(112.5)
(106.5)
Determination of Fair Value
The Group’s accounting policies require the determination of fair value, for both financial and non-financial assets and
liabilities. Set out below are the major methods and assumptions used in estimating the fair values of the Group’s financial
assets and liabilities. There is no material difference between the fair value of financial assets and liabilities falling due
within one year and their carrying amount as due to the short term maturity of these financial assets and liabilities their
carrying amount is deemed to approximate fair value.
Short term bank deposits and cash & cash equivalents
The nominal amount of all short-term bank deposits and cash & cash equivalents is deemed to reflect fair value at the
balance sheet date.
Advances to customers
The nominal amount of all advances to customers, after provision for impairment, is considered to reflect fair value. The
commercial rationale for such advances is to develop good customer relations rather than to make financial investments.
Trade & other receivables/payables
The nominal amount of all trade & other receivables/payables after provision for impairment is deemed to reflect fair value
at the balance sheet date with the exception of provisions and amounts due from Group undertakings which are discounted
to fair value.
Derivatives (interest rate swaps and forward currency contracts)
The fair values of forward currency contracts and interest rate swaps are based on market price calculations using financial
models.
The Group has adopted the following fair value measurement hierarchy for financial derivatives that are measured in the
balance sheet at fair value:
•
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities.
The fair value of financial instruments that are not traded in an active market (e.g. over the counter derivatives) are
determined using valuation techniques. These valuation techniques maximise the use of observable market data where
it is available and rely as little as possible on entity specific estimates.
•
•
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable,
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
The carrying values of all derivative financial assets and liabilities held by the Group at 29 February 2012 and 28 February
2011 were based on fair values arrived at using Level 2 inputs.
Interest bearing loans & borrowings
The fair value of all interest bearing loans & borrowings have been calculated by discounting all future cash flows to their
present value using a market rate reflecting the Group’s cost of borrowing at the balance sheet date. All loans bear interest
at floating rates. At 29 February 2012, the nominal amount of drawn debt is deemed to reflect fair value due to the short term
maturity of the debt.
1 0 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
(c) Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates,
will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
The Group enters into derivative financial contracts to mitigate risks arising in the ordinary course of business from foreign
exchange rate and interest rate movements, and also incurs financial liabilities, in order to manage these market risks. The
Group carries out all such transactions within the Treasury policy as set down by the Board of Directors. Generally the Group
seeks to apply hedge accounting in order to manage volatility in the income statement.
Commodity price risk
The Group is exposed to variability in the price of commodities used in the production or in the packaging of finished
products, such as malt, barley, sugar, apple concentrate and aluminium. Commodity price risk is managed, where
economically viable, through fixed price contracts with suppliers incorporating appropriate commodity hedging and pricing
mechanisms. The Group does 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. It is Group policy to fix the cost of a certain level of its energy
requirement through fixed price contractual arrangements directly with its energy suppliers.
Currency risk
The Company’s functional and reporting currency and that of its share capital is euro. The euro is also the Group’s reporting
currency and the currency used for all planning and budgetary purposes. However, as the Group both transacts in foreign
currencies and consolidates the results of a number of subsidiary entities with functional currencies other than euro, namely
sterling and US Dollar, it is exposed to currency risk. The Group’s primary currency exposures relate to sales transactions
by Group companies in currencies other than their functional currency (transaction risk), and fluctuations in the euro value
of the Group’s net investment in foreign currency (primarily sterling) denominated subsidiary undertakings (translation risk).
Currency exposures for the entire Group are managed and controlled centrally.
The Group seeks to minimise its foreign currency transaction exposure when economically viable by maximising the value
of its foreign currency input costs and creating a natural hedge. Group policy is to manage its remaining net exposure
by hedging a portion of the projected non-euro forecast sales revenue up to a maximum of two years ahead. Forward
foreign currency contracts are used to manage this risk. The Group does not enter into derivative financial instruments
for speculative purposes. All derivative contracts entered into are in liquid markets with credit-approved counterparties.
Treasury operations are controlled within strict terms of reference that have been approved by the Board.
The Group seeks to partially manage foreign currency translation risk through borrowings denominated in sterling. The
Group’s sterling debt facility (note 19), which had been repaid in full at the year end, was designated as a net investment
hedge of its sterling subsidiaries. In addition, the Group has a number of long term sterling intra group loans for which
settlement is neither planned nor likely to happen in the foreseeable future, and as a consequence are deemed quasi equity
in nature and are therefore part of the Group’s net investment in its foreign operations. The Group does not hedge the
translation exposure arising on the translation of the profits of foreign currency subsidiaries.
The net currency gains and losses on transactional currency exposures are recognised in the income statement and the
changes arising from fluctuations in the euro value of the Group’s net investment in foreign currency subsidiaries are
reported separately within other comprehensive income.
The currency profile of the Group’s financial instruments subject to transactional exposure as at 29 February 2012 is as follows:-
Group
Cash & cash equivalents
Trade receivables
Advances to customers
Derivative financial assets and liabilities
Interest bearing loans & borrowings
Trade payables & accruals
Provisions
Total
Euro
€m
Sterling
€m
USD/CAD Not at risk
€m
€m
Total
€m
0.7
0.1
-
-
-
(0.6)
-
13.5
1.0
-
(0.8)
-
(6.3)
-
3.4
3.0
-
-
-
(0.8)
-
110.7
75.7
24.7
-
(60.0)
(134.2)
(17.3)
128.3
79.8
24.7
(0.8)
(60.0)
(141.9)
(17.3)
0.2
7.4
5.6
(0.4)
12.8
1 0 9
NOTES - CONTINUED
Forming part of the financial statements
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
The currency profile of the Company’s financial instruments as at 29 February 2012 is as follows:-
Company
Cash & cash equivalents
Amounts due (to)/from subsidiary undertakings
Interest bearing loans & borrowings
Trade payables & accruals
Total
Euro
€m
Sterling
€m
USD/CAD Not at risk
€m
€m
Total
€m
-
-
-
-
-
-
(53.7)
-
-
(53.7)
-
-
-
-
-
9.3
74.3
(60.0)
(0.2)
9.3
20.6
(60.0)
(0.2)
23.4
(30.3)
Foreign currency contracts in place at 29 February 2012 to sell fixed amounts of sterling and US dollars for contracted euro
amounts can be summarised as follows:-
Year ended 28 February 2013
USD
Average
$m forward rate
Sterling
Average
£m forward rate
1.0
1.321
35.0
0.857
A 10% strengthening in the euro against sterling, Canadian dollar and the US dollar, based on outstanding financial assets
and liabilities at 29 February 2012, would have a €1.2m negative impact on the income statement and a €3.9m positive
impact on the cashflow hedging reserve. A 10% weakening in the euro against sterling, Canadian dollar and the US dollar
would have a €1.5m positive effect on the income statement and a €4.7m negative impact on the cash flow hedging reserve.
This analysis assumes that all other variables, in particular interest rates, remain constant.
Interest rate risk
The interest rate profile of the Group and Company’s interest-bearing financial instruments at the reporting date is
summarised as follows:
Group
Company
Variable rate instruments
Interest bearing loans & borrowings
Cash & cash equivalents
Derivative financial instruments - notional amounts
2012
€m
2011
€m
2012
€m
2011
€m
(60.0)
128.3
-
(135.3)
128.7
(50.0)
(60.0)
9.3
-
(135.3)
-
(50.0)
68.3
(56.6)
(50.7)
(185.3)
The Group and Company’s exposure to interest rate risk arises principally from its long-term debt obligations. It is Group
policy to manage interest cost and exposure to market risk centrally by using interest rate swaps to give the desired mix of
fixed and floating rate debt. With the objective of managing this mix in a cost-efficient manner, the Group and Company enter
into interest rate swap agreements under which the Group contracts to exchange, at predetermined intervals, the difference
between fixed and variable interest amounts calculated by reference to a pre-agreed notional principal. These swaps are
designated under IAS 39 Financial Instruments: Recognition and Measurement as cash flow hedges to hedge the exposure to
variability in cash flow arising from the changes in benchmark interest rates.
No outstanding interest rate swap contract existed at the 29 February 2012. At 28 February 2011, the Group had a €50m
interest rate swap in place.
1 1 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
Financial instruments: Cash flow hedges
The following table indicates the periods in which cash flows associated with derivatives that are cash flow hedges are
expected to occur:-
Group
29 February 2012
Forward exchange contracts
- assets
- liabilities
28 February 2011
Interest rate swaps
- liabilities
Forward exchange contracts
- assets
- liabilities
Carrying
amount
€m
Expected
cash flows
€m
6 months
or less
€m
6-12
months
€m
1-2 More than
2 years
€m
years
€m
0.1
(0.9)
0.1
(1.0)
0.1
(0.3)
-
(0.7)
(0.8)
(0.9)
(0.2)
(0.7)
-
-
-
(2.0)
(2.4)
(0.8)
(0.8)
(0.8)
0.4
(0.1)
0.4
(0.1)
0.4
-
-
(0.1)
-
-
(1.7)
(2.1)
(0.4)
(0.9)
(0.8)
-
-
-
-
-
-
-
The following table indicates the periods in which cash flows associated with derivatives that are cash flow hedges are
expected to impact the income statement:-
Group
29 February 2012
Forward exchange contracts
- assets
- liabilities
28 February 2011
Interest rate swaps
- liabilities
Forward exchange contracts
- assets
- liabilities
Carrying
amount
€m
Expected
cash flows
€m
6 months
or less
€m
6-12
months
€m
1-2 More than
2 years
€m
years
€m
0.1
(0.9)
0.1
(0.7)
0.1
(0.3)
-
(0.4)
(0.8)
(0.6)
(0.2)
(0.4)
-
-
-
(2.0)
(2.4)
(0.8)
(0.8)
(0.8)
0.4
(0.1)
0.3
(0.1)
0.3
-
-
(0.1)
-
-
(1.7)
(2.2)
(0.5)
(0.9)
(0.8)
-
-
-
-
-
-
-
The following table indicates the periods in which cash flows associated with derivatives that are cash flow hedges are
expected to occur:-
Company
29 February 2012
Interest rate swaps
- liabilities
28 February 2011
Interest rate swaps
- liabilities
Carrying
amount
€m
Expected
cash flows
€m
6 months
or less
€m
6-12
months
€m
1-2 More than
2 years
€m
years
€m
-
-
-
-
-
-
-
-
-
-
(2.0)
(2.4)
(0.8)
(0.8)
(0.8)
(2.0)
(2.4)
(0.8)
(0.8)
(0.8)
-
-
-
-
The cash flows associated with derivatives that are cash flow hedges are expected to impact the income statement in the
same periods.
1 1 1
NOTES - CONTINUED
Forming part of the financial statements
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
(d) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s trade receivables, its cash advances to customers, cash & cash
equivalents including deposits with banks and derivative financial instruments contracted with banks. The Group has an indirect
exposure to European Sovereigns via its defined benefit pension scheme investment portfolio. In the context of the Group’s
operations, credit risk is mainly influenced by the individual characteristics of individual counterparties and is not considered
particularly concentrated as primarily arises from a wide and varied customer base.
The Group has detailed procedures for monitoring and managing the credit risk related to its trade receivables and advances
to customers based on experience, customer track records and historic default rates. Generally, individual ‘risk limits’ are
set by customer and risk is only accepted above such limits in defined circumstances. A strict credit assessment is made
of all new applicants who request credit-trading terms. The utilisation and revision, where appropriate, of credit limits is
regularly monitored. Impairment provision accounts are used to record impairment losses unless the Group is satisfied that
no recovery of the amount owing is possible. At that point, the amount is considered irrecoverable and is written off directly
against the trade receivable.
Advances to customers are generally secured by, amongst others, rights over property or intangible assets, such as the right
to take possession of the premises of the customer. Interest rates calculated on repayment/annuity advances are generally
based on the risk-free rate plus a margin, which takes into account the risk profile of the customer and value of security
given. In some circumstances, the interest rate charged may be reduced to reflect the margins earned by the Group from
trading activity with that customer. The Group establishes an allowance for impairment of advances that represents its
estimate of potential future losses.
From time to time, the Group holds significant cash balances, which are invested on a short-term basis and disclosed under cash
& cash equivalents in the balance sheet. Risk of counterparty default arising on short term cash deposits is controlled within a
framework of dealing with banks who are members of the Group’s banking syndicate, and by limiting the credit exposure to any
one of these banks or institutions. Management does not anticipate any counterparty to fail to meet its obligations.
The Company also bears credit risk in relation to amounts owed by Group undertakings and from guarantees provided in
respect of the liabilities of wholly owned subsidiaries as disclosed in note 28.
The carrying amount of financial assets, net of impairment provisions represents the maximum credit exposure. The
maximum exposure to credit risk at the reporting date was:-
Group
Company
Trade receivables
Advances to customers
Amounts due from Group undertakings
Cash & cash equivalents
Forward exchange contracts
2012
€m
79.8
24.7
-
128.3
0.1
2011
€m
91.0
24.4
-
128.7
0.4
2012
€m
-
-
30.6
9.3
-
232.9
244.5
39.9
2011
€m
-
-
24.9
-
-
24.9
The ageing of trade receivables and advances to customers together with an analysis of movement in the Group impairment
provisions against these receivables are disclosed in note 16. The Group does not have any significant concentrations of risk.
(e) Liquidity risk
Liquidity risk is the risk that the Group or Company will not be able to meet its financial obligations as they fall due. Liquid
resources are defined as the total of cash & cash equivalents. The Group finances its operations through cash generated by the
business and medium term bank credit facilities; the Group does not use off-balance sheet special purpose entities as a source
of liquidity or financing.
The Group’s policy is to ensure that sufficient resources are available either from cash balances, cash flows or committed bank
facilities to meet all debt obligations as they fall due. To achieve this, the Group (a) maintains adequate cash or cash equivalent
balances; (b) prepares detailed 3 year cash projections; and (c) keeps refinancing options under review. In addition, the Group
maintains an overdraft facility that is unsecured.
The Group entered into a €250.0m committed multi-currency five year syndicated revolving loan facility repayable in full on
maturity (28 February 2017) with seven banks, including Bank of Ireland, Bank of Scotland, Barclays Bank, Danske Bank, HSBC,
Rabobank and Ulster Bank. There were no drawn funds under this facility as at 29 February 2012.
Compliance with the Group’s bi-annual debt covenants (net debt:EBITDA and interest cover) is monitored continuously.
The Group’s main liquidity risk relates to maturing debt. The strong cash generative nature of the business and the disposal,
during the previous financial year, of the Group’s Spirits and Liqueurs business for a gross consideration of €300.0m
significantly reduced this risk. The Directors consider the risk low at the year end date as the Group ended the year in
1 1 2
C & C G R O U P P L C
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
a strong cash position reporting net cash of €68.3m and, as noted above, concluded negotiations on a committed €250.0m five
year multi-currency syndicated facility in February 2012 (note 19). As at 29 February 2012, undrawn borrowing capacity under
committed bank facilities amounted to €375.0m, of which €125.0m was subsequently cancelled on repayment of the 2007
syndicated revolving debt facility on 30 March 2012.
The following are the contractual maturities of financial liabilities, including interest payments and derivatives and excluding the
impact of netting arrangements:-
Group
2012
Interest bearing loans & borrowings
FX forward contracts – gross cash outflows
FX forward contracts – gross cash inflows
Trade payables & accruals
Provisions
Carrying Contractual
cash flows
amount
€m
€m
6 mths
or less
€m
6-12
months
€m
1-2 years
€m
>2 years
€m
(60.0)
(0.9)
-
(141.9)
(17.3)
(60.0)
(35.7)
34.8
(141.9)
(21.0)
(60.0)
(11.9)
11.6
(141.9)
(5.5)
-
(23.8)
23.2
-
(0.9)
-
-
-
-
(2.2)
-
-
-
-
(12.4)
Total contracted outflows
(220.1)
(223.8)
(207.7)
(1.5)
(2.2)
(12.4)
2011
Interest bearing loans & borrowings
Interest rate swaps – net cash outflows
FX forward contracts – gross cash outflows
FX forward contracts – gross cash inflows
Trade payables & accruals
Provisions
(135.0)
(2.0)
(0.1)
-
(139.1)
(15.7)
(137.8)
(2.4)
(23.6)
23.8
(139.1)
(24.4)
(36.6)
(0.8)
(11.8)
12.2
(139.1)
(3.2)
(0.9)
(0.8)
(11.8)
11.6
-
(0.6)
(100.3)
(0.8)
-
-
-
(1.7)
-
-
-
-
-
(18.9)
Total contracted outflows
(291.9)
(303.5)
(179.3)
(2.5)
(102.8)
(18.9)
Company
2012
Interest bearing loans & borrowings
Amounts due to Group undertakings
Trade payables & accurals
Total contracted outflows
2011
Interest bearing loans & borrowings
Interest rate swaps – net cash outflows
Trade payables & accruals
6-12
months
€m
1-2 years
€m
>2 years
€m
Carrying Contractual
cash flows
amount
€m
€m
(60.0)
(10.0)
(0.2)
(60.0)
(10.0)
(0.2)
6 mths
or less
€m
(60.0)
(10.0)
(0.2)
(70.2)
(70.2)
(70.2)
-
-
-
-
-
-
-
-
(135.0)
(2.0)
(0.4)
(137.8)
(2.4)
(0.4)
(36.6)
(0.8)
(0.4)
(0.9)
(0.8)
-
(100.3)
(0.8)
-
-
-
-
-
-
-
-
-
Total contracted outflows
(137.4)
(140.6)
(37.8)
(1.7)
(101.1)
(f) Accounting for derivative financial instruments and hedging activities
Group
Financial assets: current
Forward exchange contracts
Financial liabilities: current
Interest rate swaps
Forward exchange contracts
Financial liabilities: non-current
Interest rate swaps
Group
2012
€m
2011
€m
Company
2012
€m
2011
€m
0.1
0.1
0.4
0.4
-
(0.9)
(1.3)
(0.1)
(0.9)
(1.4)
-
-
(0.7)
(0.7)
-
-
-
-
-
-
-
-
-
(1.3)
-
(1.3)
(0.7)
(0.7)
Derivatives are initially recorded at fair value on the date the contract is entered into and subsequently re-measured to fair
value at reporting dates. The gain or loss arising on re-measurement is recognised in the income statement except where
the instrument is a designated hedging instrument under the cash flow hedging model.
1 1 3
1 1 3
NOTES - CONTINUED
Forming part of the financial statements
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT - CONTINUED
Cash flow hedges
The Group enters into interest rate swap agreements designated as cash flow hedges to manage the interest cost on
borrowings. The Group had no interest rate swap contracts outstanding at 29 February 2012 (28 February 2011: €50m). The
Group also enters into forward exchange contracts designated as cash flow hedges to manage short term foreign currency
exposures to expected future sales. As at 29 February 2012, the notional amount of these contracts was Stg£35.0m and
US$1.0m (28 February 2011: Stg£20.0m).
In order to qualify for hedge accounting, the Group is required to document the relationship between the item being hedged and
the hedging instrument and demonstrate, at inception, that the hedge relationship will be highly effective on an ongoing basis.
The hedge relationship must also be tested for effectiveness retrospectively and prospectively on subsequent reporting dates.
Gains and losses on cash flow hedges that are determined to be highly effective are recognised in other comprehensive
income and then reflected in a cash flow hedging reserve within equity to the extent that they are actually effective. When
the related forecasted transaction occurs, the deferred gains or losses are reclassified from other comprehensive income to
the income statement. Ineffective portions of the gain or loss on the hedging instrument are recognised immediately in the
income statement.
All interest rate swaps entered into by the Group and Company are designated as cash flow hedges in accordance with IAS
39 Financial Instruments: Recognition and Measurement. The Group has tested these hedging relationships and determined
them to be highly effective, both prospectively and retrospectively. The actual level of ineffectiveness arising in such
relationships is not material.
The Group ordinarily seeks to apply the hedge accounting model to all forward currency contracts.
At 29 February 2012, the effective portion of gains and losses arising on derivative financial contracts have been deferred in
other comprehensive income only to the extent that they relate to highly probable forecast transactions and where all the
hedge accounting criteria in IAS 39 Financial Instruments: Recognition and Measurement have been met.
24. SHARE CAPITAL AND RESERVES
Share capital
At 29 February 2012
Ordinary shares of €0.01 each
At 28 February 2011
Ordinary shares of €0.01 each
At 28 February 2010
Ordinary shares of €0.01 each
Authorised
Number
Allotted and
called up
Number
Authorised
€m
Allotted and
called up
€m
800,000,000
339,274,722*
8.0
3.4
800,000,000
337,196,128**
8.0
3.4
800,000,000
334,068,149***
8.0
3.3
inclusive of 12.4m treasury shares which are not fully paid up. The balance of 326,911,485 ordinary shares are fully paid
*
**
inclusive of 12.6m treasury shares which are not fully paid up. The balance of 324,609,460 ordinary shares are fully paid
*** inclusive of 16.0m treasury shares which are not fully paid up. The balance of 318,068,149 ordinary shares are fully paid
All shares in issue carry equal voting and dividend rights. The beneficial owners of the 12.4m (2011:12.6m) shares issued
under the Joint Share Ownership Plan have waived their right to receive dividends under the terms of the Plan.
Reserves
Group
As at 1 March
Shares issued in lieu of dividend
Shares issued in respect of options exercised
Shares disposed of or transferred to Participants
As at 29/(28) February
Allotted and called
up Ordinary Shares
2012
‘000
2011
‘000
Ordinary Shares held
by the Trustee of the
Employee Benefit Trust
2011
‘000
2012
‘000
337,196
1,370
709
-
339,275
334,068
2,538
590
-
337,196
12,587
-
-
(224)
12,363*
16,000
-
-
(3,413)
12,587
* 1,226,669 (2011:650,000) shares are held in the sole name of the Trustee of the Employee Benefit Trust.
1 1 4
C & C G R O U P P L C
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
24. SHARE CAPITAL AND RESERVES - CONTINUED
Movements in the year ended 29 February 2012
In July 2011, 316,818 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary
shares at a price of €3.59 per share, instead of part or all the cash element of their final dividend entitlement for the year
ended 28 February 2011. In December 2011, 1,053,176 ordinary shares were issued to the holders of ordinary shares who
elected to receive additional ordinary shares at a price of €2.89 per share, instead of part or all the cash element of their
interim dividend entitlement for the year ended 29 February 2012. Also during the financial year, 708,600 ordinary shares
were issued on the exercise of share options for a net consideration of €1.5m.
During the financial year, 625,000 unvested Interests and 175,000 vested Interests awarded under the Joint Share Ownership
Plan and held by participants who had left the Group were acquired by Kleinwort Benson (Guernsey) Trustees Limited as
trustees of the C&C Employee Benefit Trust and held in trust on behalf of employees. 223,431 shares were either sold by the
Trustees or transferred to participants on the vesting of Interests and are no longer accounted for as Treasury shares. All
shares held by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Benefit Trust which were
neither cancelled nor disposed of by the Trust at 29 February 2012 continue to be included in the treasury share reserve.
Movements in the year ended 28 February 2011
In September 2010, 1,276,318 ordinary shares were issued to the holders of ordinary shares who elected to receive additional
ordinary shares at a price of €3.19 per share, instead of part or all the cash element of their final dividend entitlement for
the year ended 28 February 2010. In December 2010, 1,261,761 ordinary shares were issued to the holders of ordinary shares
who elected to receive additional ordinary shares at a price of €3.17 per share, instead of part or all the cash element of their
interim dividend entitlement for the year ended 28 February 2011. Also during the financial year, 589,900 ordinary shares
were issued on the exercise of share options for a consideration of €1.2m.
In June 2010, 3,413,332 vested Interests awarded under the Joint Share Ownership Plan in December 2008 were sold and
are no longer accounted for as Treasury shares. In addition, 650,000 unvested Interests held by participants who had left the
Group were acquired by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Benefit Trust and
continue to be held in trust by them while a further 50,000 vested Interests held by a participant who had left the Group had
not been sold at 28 February 2011. As these shares were neither cancelled nor disposed of by the Trust at 28 February 2011
they continue to be included in the treasury share reserve.
Share premium - Group
The change in legal parent of the Group on 30 April 2004, as disclosed in detail in that year’s annual report, was accounted for as
a reverse acquisition. This transaction gave rise to a reserve of €703.9m, which, for presentation purposes in the Group financial
statements, has been netted against the share premium in the consolidated balance sheet.
Share premium - Company
The share premium, as stated in the Company balance sheet, represents the premium recognised on shares issued and amounts
to €793.9m as at 29 February 2012 (2011: €788.2m). The current year movement relates to the exercise of share options and the
issuance of a scrip dividend to those who elected to receive additional ordinary shares in place of a cash dividend.
Capital redemption reserve and capital reserve
These reserves initially arose on the conversion of preference shares into share capital of the Company and other changes and
reorganisations of the Group’s capital structure. These reserves are not distributable.
Cash flow hedging reserve
The hedging reserve includes the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred as set out in note 23 together with any deferred gains or losses on
hedging contracts where hedge accounting was discontinued but the forecast transaction was still anticipated to occur.
Share-based payment reserve
The reserve relates to amounts expensed in the income statement in connection with share option grants falling within the
scope of IFRS 2 Share-based Payment plus amounts received from participants on award of Interests under the Group’s Joint
Share Ownership Plan less reclassifications to retained income following exercise/forfeit post vesting or lapse of such share
options and Interests, as set out in note 4.
Currency translation reserve
The translation reserve comprises all foreign exchange differences from 1 March 2004, arising from the translation of the
Group’s net investment in its non-euro denominated operations, including the translation of the profits of such operations
from the average exchange rate for the year to the exchange rate at the balance sheet date, as adjusted for the translation
of foreign currency borrowings designated as net investment hedges.
Treasury shares
This reserve arises when the Company issues equity share capital under its Joint Share Ownership Plan, which is held in
trust by the Group’s Employee Benefit Trust. The consideration paid, 90% by a Group company and 10% by the participants,
in respect of these shares is deducted from total shareholders’ equity and classified as treasury shares on consolidation until
such time as the Interests vest and the participant acquires the shares from the Trust or the Interests lapse and the shares
are cancelled or disposed of by the Trust.
1 1 5
NOTES - CONTINUED
Forming part of the financial statements
24. SHARE CAPITAL AND RESERVES - CONTINUED
Capital management
The Board’s policy is to maintain a strong capital base so as to safeguard the Group’s ability: to continue as a going concern
for the benefit of shareholders and stakeholders; to maintain investor, creditor and market confidence; and, to sustain the
future development of the business through the optimisation of the value of its debt and equity shareholding balance.
The Board considers capital to comprise long-term debt and equity. There are no externally imposed requirements with
respect to capital with the exception of a financial covenant in the Group’s debt facilities which limits the net debt:EBITDA
ratio to a maximum of 3.5 times. This financial covenant was complied with throughout the year.
The Board periodically reviews the capital structure of the Group, considering the cost of capital and the risks associated with
each class of capital. The Board approves any material adjustments to the capital structure in terms of the relative proportions
of debt and equity. In order to maintain or adjust the capital structure, the Group may issue new shares, dispose of assets to
reduce debt, alter dividend policy by increasing or reducing the dividend paid to shareholders, return capital to shareholders
and/or buy back shares. In respect of the financial year ended 29 February 2012, the Company paid an interim dividend on
ordinary shares of 3.67c per share (2011: 3.3c per share) and the Directors propose, subject to shareholder approval, that a final
dividend of 4.5c per share be paid, bringing the total dividend for the year to 8.17c per share (2011: 6.6c per share).
The Group monitors debt capital on the basis of interest cover and by the ratio of Net debt:EBITDA before exceptional items.
At 29 February 2012, the Group was net cash positive. During the financial year, the Group entered into a new five year
committed €250.0m multi-currency syndicated revolving debt facility with seven banks and repaid the outstanding amounts
drawn under its sterling debt facility. The Group’s 2007 Euro facility, which was due to mature in May 2012, was voluntarily
repaid and cancelled on 30 March 2012 from surplus cash resources (note 19).
Company income statement
In accordance with Section 148(8) of the Companies (Amendment) Act, 1963, the income statement of the Company has not
been presented separately in these consolidated financial statements. A profit of €96.8m (2011: €5.6m loss) was recognised
in the individual Company income statement of C&C Group plc.
25. COMMITMENTS
(a) Capital commitments
At the year-end, the following capital commitments authorised by the Board had not been provided for in the financial statements:-
Contracted
Not contracted
2012
€m
3.7
6.7
10.4
2011
€m
7.0
11.7
18.7
The contracted capital commitments at 29 February 2012 primarily relate to capital expenditure associated with the bottling
line at Shepton Mallet while those at 28 February 2011 primarily relate to costs associated with transferring the Gaymers
cider business onto a new IT systems platform. The transfer of the Gaymers cider business onto the new platform was
completed in August 2011.
(b) Commitments under operating leases
Future minimum rentals payable under non-cancellable operating leases at the year end are as follows:
Payable in less than one year
Payable between 1 and 5 years
Payable greater than 5 years
2012
Land &
buildings
€m
Plant &
machinery
€m
4.0
14.8
15.6
34.4
0.4
1.1
0.1
1.6
Other
€m
0.4
1.2
0.2
1.8
(c) Other commitments
At the year end, the value of contracts placed for future expenditure was :-
Other commitments
Land &
Plant &
buildings machinery
€m
€m
Total
€m
4.8
17.1
15.9
4.0
14.7
18.9
37.8
37.6
0.8
2.0
-
2.8
2011
Other
€m
0.6
0.1
-
0.7
2012
€m
40.5
Total
€m
5.4
16.8
18.9
41.1
2011
€m
33.3
Commitments for future expenditure primarily relate to minimum purchase commitments for packaging materials, fixed
charge commitments in relation to logistics and warehousing services and commitments under the Group’s sponsorship
agreements. The commitments are principally due within a period of twenty four months.
1 1 6
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
26. GUARANTEES AND CONTINGENCIES
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of companies within the Group, the
Company considers these to be insurance arrangements and accounts for them as such. The Company treats the guarantee contract
as a contingent liability until such time as it becomes probable that it will be required to make a payment under the guarantee.
As outlined in note 19, the Company has two syndicated bank loan facilities in place at year end, a euro loan facility entered into
in May 2007, scheduled to mature in May 2012, and a multi-currency loan facility entered into in February 2012. The Company,
together with a number of its subsidiaries, gave a letter of guarantee to secure its obligations in respect of these loans. The actual
loans outstanding at 29 February 2012 amounted to €60.0m (2011: €135.3m).
During the previous financial year, Tennent Caledonian Breweries UK Limited, entered into a guarantee with Clydesdale Bank plc
whereby it guaranteed £250,000 plus interest and charges of the drawn debt of one of its customers. The guarantee expires on
the earliest of; 10 years from the date on which the guarantee becomes effective, the secure liabilities are repaid, or by mutual
agreement with Clydesdale Bank plc.
Enterprise Ireland funding of €0.9m (€0.3m in the current financial year) was received towards the costs of implementing
developmental projects. Scottish Enterprise Board funding of €0.3m (€0.1m in the current financial year) was received under the
terms of its Regional Selective Assistance Scotland Scheme. These funds are fully repayable should the Company at any time
during the term of the Agreements be in breach of the terms and conditions of the Agreements. The Agreements terminate five
years from inception.
Under the terms of the Sale and Purchase Agreements with respect to the disposal of the Wines and Spirits distribution
businesses in the year to 28 February 2009, the Group had a maximum exposure of €9.6m with respect to the Republic of Ireland
business and £1.9m with respect to the Northern Ireland business in relation to warranties undertaken. The time limit for all
claims with respect to these warranties expired on 13 June 2010 and 26 August 2010 respectively, except for any claim relating to
tax in Northern Ireland where the time limit is 7 years from the transaction date.
Under the terms of the Sale and Purchase Agreement with respect to the prior year disposal of the Group’s Spirits & Liqueurs business
to William Grant & Sons Holdings Limited, the Group had a maximum aggregate exposure of €300.0m in relation to warranties (€99.0m
in relation to tax warranties). The time limit for the notification of all claims with respect to all warranties with the exception of tax claims
expired in December 2011. The time limit for any claim relating to tax is 5 years from the transaction date and is due to expire in June 2015.
Under the terms of the Sale and Purchase Agreement with respect to the current year disposal of the Group’s Northern Ireland
wholesaling business, the Group has a maximum aggregate exposure of £4.3m in relation to warranties. The time limit for
notification of all claims with respect to these warranties is 18 months from the transaction date, with the exception of a claim
relating to tax where the time limit is 7 years from the transaction date.
Pursuant to the provisions of Section 17 of the Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of
its subsidiary companies incorporated in the Republic of Ireland for the financial year to 29 February 2012 and as a result such
subsidiaries are exempt from the filing provisions of Section 7, Companies (Amendment) Act, 1986 (note 28).
27. RELATED PARTy TRANSACTIONS
The principal related party relationships requiring disclosure in the consolidated financial statements of the Group under IAS 24
Related Party Disclosures pertain to the existence of subsidiary undertakings, transactions entered into by the Group with these
subsidiary undertakings and the identification and compensation of key management personnel.
(a) Group
Transactions
Transactions between the Group and its related parties are made on terms equivalent to those that prevail in arm’s length
transactions.
Subsidiary undertakings
The consolidated financial statements include the financial statements of the Company and its subsidiaries. A listing of all subsidiaries is
provided in note 28. Sales to and purchases from, together with outstanding payables and receivables, are eliminated in the preparation of
the consolidated financial statements in accordance with IAS 27 Consolidated Financial Statements.
Key management personnel
For the purposes of the disclosure requirements of IAS 24 Related Party Disclosures, the Group has defined the term ‘key
management personnel’, as its executive and non-executive Directors. Executive Directors participate in the Group’s share option
programmes (note 4). No other non-cash benefits are provided. Non-executive Directors do not receive share-based payments or
post employment benefits.
Details of key management remuneration are as follows:-
Number of individuals
Salaries and other short term employee benefits
Post employment benefits
Equity settled share-based payments
Total
2012
Number
2011
Number
10
€m
3.6
0.4
0.3
4.3
11
€m
2.4
0.4
1.4
4.2
1 1 7
NOTES - CONTINUED
Forming part of the financial statements
27. RELATED PARTy TRANSACTIONS - CONTINUED
John Dunsmore, who resigned from the Board on 29 February 2012, has been included in the headcount numbers and in the
disclosure of remuneration charged to the income statement. Tony O’Brien, who resigned from the Board on 5 August 2010,
has been included in the prior year headcount and remuneration charged to the income statement.
The Group accepted the resignation of John Dunsmore and agreed with him that he would cease to be Group Chief Executive
Officer on 31 December 2011 and would cease to be an executive Director and employee of the Group on 29 February 2012. It
was agreed that he would continue to be entitled to a payment equal to his bonus (subject to achievement of bonus targets)
in respect of FY2012 but no other compensation for loss of office was paid. Any notice due under his service contract was
waived. All his interests in the Joint Share Ownership Plan vested prior to the cessation of his employment and it was agreed
that he was entitled to retain them within the Plan, which he has elected to do. It was also agreed that any options held by
him under the Executive Share Option Scheme lapsed upon cessation of his employment.
The relevant disclosure of Directors remuneration as required under the Companies Act, 1963 is as outlined above.
When an award is granted to an executive under the Group’s Joint Share Ownership Plan, its value is assessed for tax
purposes with the resulting value being deemed to fall due for payment on the date of grant. Under the terms of the Plan,
the executive must pay the Entry Price at the date of grant and, if the tax value exceeds the Entry Price, he must pay a
further amount, equating to the amount of such excess, before a sale of the awarded Interests. The deferral of the payment
of the further amount is considered to be an interest-free loan by the Company to the executive and a taxable benefit-in-
kind arises, charged at the Revenue stipulated rates (Ireland 12.5%; UK 4%). The balances of the loans outstanding to the
executive Directors in the context of the above as at 29 February 2012 and 28 February 2011 are as follows:
John Dunsmore
Stephen Glancey
Kenny Neison
Total
29 February
2012
€’000
28 February
2011
€’000
-
111
83
194
111
111
83
305
John Dunsmore repaid all loans outstanding on 29 February 2012.
(b) Company
The Company has a related party relationship with its subsidiary undertakings. Details of the transactions in the year
between the Company and its subsidiary undertakings are as follows:
Dividend income
Expenses paid on behalf of and recharged by subsidiary undertakings to the Company
Equity settled share-based payments for employees of subsidiary undertakings
Repayment of cash funding and other cash movements with subsidiary undertakings
2012
€m
100.0
(7.1)
2.6
9.4
2011
€m
-
(12.1)
4.0
371.2
28. SUBSIDIARy UNDERTAKINGS
Trading subsidiaries
Incorporated and registered in Republic of Ireland
Nature of business
Class of shares held (100%)
Bulmers Limited
C&C Financing Limited
*
#* C&C Group International Holdings Limited
*
*
*
*
*
*
*
* Wm. Magner Limited
C&C Group Irish Holdings Limited
C&C Group Sterling Holdings Limited
C&C (Holdings) Limited
C&C Management Services 2007 Limited
Cantrell & Cochrane Limited
Findlater (Wine Merchants) Limited
Tennent’s Beer Limited
Incorporated and registered in Northern Ireland
C&C Holdings (NI) Limited
Tennent’s NI Limited
Incorporated and registered in England and Wales
C&C Management Services (UK) Limited
Magners GB Limited
Incorporated and registered in Scotland
Tennent Caledonian Breweries UK Limited
1 1 8
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
Cider
Financing company
Holding company
Holding company
Holding company
Holding company
Provision of management services
Holding company
Holding company
Beer distribution
Cider distribution
Holding company
Cider & beer distribution
Provision of management services
Cider & Beer
Beer & Cider
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
28. SUBSIDIARy UNDERTAKINGS - CONTINUED
Trading subsidiaries - continued
Incorporated and registered in Luxembourg
C&C IP Sàrl
C&C Luxembourg Sàrl
Incorporated and registered in Delaware, USA
C&C Beverages, Inc.
Wm. Magner, Inc.
Non-trading subsidiaries
Incorporated and registered in Republic of Ireland
* Bestormel Limited
* Bouchel Limited
*
C&C Agencies Limited
*
C&C Brands Limited
*
C&C Group Pension Trust (No. 2) Limited
*
C&C Group Pension Trust Limited
*
C&C Profit Sharing Trustee Limited
*
Ciscan Net Limited
*
Cravenby Limited
*
Edward and John Burke (1968) Limited
Fruit of the Vine Limited
*
* Magners Irish Cider Limited
*
*
*
*
Sceptis Limited
Showerings (Ireland) Limited
Thwaites Limited
Vandamin Limited
Incorporated and registered in Northern Ireland
Nature of business
Class of shares held (100%)
Licensing activity
Holding and financing company
Cider & Beer
Cider distribution
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
C&C 2011 (NI) Limited (formerly Quinns of Cookstown (1964) Limited) Non-trading
Non-trading
C&C Logistics (NI) Limited
Non-trading
C&C Profit Sharing Trustee (NI) Limited
Non-trading
Reihill McKeown Limited
Incorporated and registered in England and Wales
Gaymer Cider Company Limited
Incorporated and registered in Germany
Wm. Magner GmbH (in liquidation)
Immediate subsidiary of C&C Group plc
#
* Companies covered by Section 17 guarantees (note 26)
Non-trading
Non-trading
All the above companies that are incorporated and registered in Republic of Ireland have their registered office at Annerville,
Clonmel, Co Tipperary with the exception of C&C Group plc, C&C Financing Limited and C&C Group Sterling Holdings
Limited which have their registered office at Block 71, The Plaza, Parkwest Business Park, Dublin 12.
All the above companies that are incorporated and registered in Northern Ireland have their registered offices at Hawthorn
House, 6 Wildflower Way, Belfast, Antrim BT12 6TA.
C&C Beverages Inc has its registered office at 2711 Centerville Road, Suite 400, Wilmington, New Castle, 19808 Delaware.
C&C Luxembourg Sàrl and C&C IP Sarl have their registered offices at L-1232 Luxembourg, 18 avenue Marie-Thérèse.
C&C Management Services (UK) Limited and Magners GB Limited have their registered offices at The Communications
Building, 48 Leicester Square, London, WC2H 7LT.
Gaymer Cider Company Limited has its registered office at Kilver Street, Shepton Mallet, Somerset, BA4, 5ND.
Tennent Caledonian Breweries UK Limited has its registered office at Wellpark Brewery, 161 Duke Street, Glasgow, G31 1JD.
Wm Magner GmbH has its registered office at Hans-Steiberger-StraBe 2b, 85540 Harr,Germany.
Wm Magner, Inc. has its registered office at 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle.
Cantrell & Cochrane BV was dissolved on 11 March 2011, while C&C Investments Limited, Lough Corrib Mineral Water
Company Limited, M O’Sullivan & Sons Limited were dissolved on 15 July 2011.
29. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved by the Directors on 16 May 2012.
1 1 9
DEFINITIONS
FINANCIAL DEFINITIONS
Adjusted earnings
Earnings as adjusted for exceptional
items
IFRS
Interest cover
Company
C&C Group plc
Constant Currency
DWT
EBITDA
Prior year revenue, net revenue and
operating profit for each of the Group’s
operating segments is restated to
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 denominated subsidiaries by
revaluing the prior year figures using the
current year effective foreign currency
rates
Dividend withholding tax
Earnings before Interest, Tax,
Depreciation and Amortisation charges
Adjusted EBITDA
EBITDA as adjusted for exceptional
items
EBIT
Earnings before Interest and Tax
Effective tax rate (%)
Income and deferred tax charges
relating to continuing activities before
the tax impact of exceptional items
calculated as a percentage of Profit
before tax for continuing activities
before exceptional items.
EPS
Earnings per Share
Significant items of income and
expense within Group results for the
year
European Union
Sales in territories outside of the
United Kingdom (UK) and Republic
of Ireland (ROI)
Free Cash Flow is a non-GAAP
measure that comprises cash flow
from operating activities net of capital
investment cash outflows which form
part of investing activities. Free Cash
Flow highlights the underlying cash
generating performance of the ongoing
business
Great Britain (i.e. England, Wales and
Scotland)
C&C Group plc and its subsidiaries
Hectolitre (100 Litres)
kHl = kile hectolitre (100,000 litres)
mHl = millions of hectolitres
(100 million litres)
International Accounting Standards
Exceptional
EU
Export
Free cash flow
GB
Group
HL
IAS
IASB
IFRIC
LAD
NI
Revenue
ROI
UK
US
Net (cash)/debt
Net debt:EBITDA
Net revenue
Off-trade
International Financial Reporting
Standards as adopted by the EU
Calculated by dividing the Group’s
earnings before interest, tax,
depreciation and amortisation charges
(EBITDA) excluding exceptional items
and discontinued activities of one
period by the Group’s interest expense,
excluding issue cost write-offs and
unwind of discounts on provisions, of
the same period
Long Alcoholic Drinks
Northern Ireland
Revenue comprises the fair value of
goods supplied to external customers
exclusive of intercompany sales and
value added tax, after allowing for
discounts, rebates, allowances for
customer loyalty and other pricing
related allowances and incentives
Republic of Ireland
United Kingdom (Great Britain and
Northern Ireland)
United States of America
Net (cash)/debt comprises cash,
borrowings net of issue costs and the
fair value of interest rate derivative
financial instruments
A measurement of leverage, calculated
as the Group’s interest-bearing liabilities
and derivative financial liabilities less
cash & cash equivalents, divided by its
EBITDA excluding exceptional items and
discontinued activities. The net debt to
EBITDA ratio is a debt ratio that shows
how many years it would take for the
Group to pay back its debt if net debt and
EBITDA are held constant
Net revenue is defined by the Group as
Revenue less Excise duty. Excise duties,
which represent a significant proportion
of Revenue, are set by external
regulators over which the Group has
no control and are generally passed
on to the consumer, consequently
the Directors consider that the
disclosure of Net Revenue enhances
the transparency and provides a more
meaningful analysis of underlying sales
performance
All venues where drinks are sold for
off-premise consumption including
shops, supermarkets and cash & carry
outlets selling alcohol for consumption
off the premises
All venues where drinks are sold at
retail for on-premise consumption
including pubs, hotels and clubs
selling alcohol for consumption on the
premises
International Accounting Standards
Board
On-trade
International Financial Reporting
Interpretations Committee
1 2 0
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
TSR
Total Shareholder Return
SHAREHOLDER AND OTHER INFORMATION
C&C Group plc is an Irish registered company. Its ordinary shares are quoted on the Irish and London Stock Exchanges. C&C
Group plc also has a Level 1 American Depository Receipts (ADR) programme for which Deutsche Bank acts as depository
(symbol CCGGY). Each ADR share represents three C&C Group plc ordinary shares. The authorised share capital of the Company
at 29 February 2012 was 800,000,000 ordinary shares at €0.01 each. The issued share capital at 29 February 2012 was 339,274,722
ordinary shares of €0.01 each.
CREST
C&C Group plc is a member of the CREST share settlement system therefore transfers of the Company’s shares takes place
through the CREST settlement system. Shareholders have the choice of holding their shares in electronic form or in the form of
share certificates. Shareholders should consult their stockbroker if they wish to hold their shares in electronic form.
SHARE PRICE DATA
Share price at 29/(28) February
No of Shares in issue at 29/(28) February
Market capitalisation
Share price movement during the financial year
-high
-low
2012
€3.665
2011
€3.535
Number
Number
339,274,722 337,196,128
€1,243m
€1,192m
€3.69
€2.70
€3.60
€2.75
DIVIDEND PAyMENTS
The Company may, by ordinary resolution declare dividends in accordance with the respective rights of shareholders, but no
dividend shall exceed the amount recommended by the Directors. The Directors may also declare and pay interim dividends if
they believe they are justified by the profits of the Company available for distribution.
An interim dividend of 3.67 cent per share was paid in respect of ordinary shares on 16 December 2011.
A final dividend of 4.5 cent, if approved by shareholders at the 2012 Annual General Meeting, will be paid in respect of ordinary
shares on 13 July 2012. A scrip alternative will be offered to shareholders.
Dividend Withholding Tax (‘DWT’) must be deducted from dividends paid by an Irish resident company, unless a shareholder is
entitled to an exemption and has submitted a properly completed exemption form to the Company’s Registrars. DWT applies to
dividends paid by way of cash or by way of shares under a scrip dividend scheme and is deducted at the standard rate of income
tax (currently 20%). Non-resident shareholders and certain Irish companies, trusts, pension schemes, investment undertakings,
companies resident in any member state of the European Union and charities may be entitled to claim exemption from DWT
and have been sent the relevant exemption form. Further copies of the form may be obtained from the Company’s Registrars.
Shareholders should note that DWT will be deducted from dividends in cases where a properly completed exemption form has not
been received by the relevant record date. Individuals who are resident in Ireland for tax purposes are not entitled to an exemption.
Shareholders who wish to have their dividend paid direct to a bank account, by electronic funds transfer, should contact Capita
Registrars to obtain a mandate form. Tax vouchers will be sent to the shareholder’s registered address under this arrangement.
CREST members
Shareholders who hold their shares via CREST will automatically receive dividends in euro unless they elect otherwise.
Non-CREST members
Shareholders who hold their shares in certificate form will automatically receive dividends in euro with the following exceptions:
• Shareholders with an address in the United Kingdom (UK) will automatically receive dividends in sterling,
• Shareholders who had previously elected to receive dividends in a particular currency will continue to receive dividends in that
currency.
Shareholders who wish to receive dividends in a currency other than that which will be automatically used should contact the
Company’s Registrars.
ELECTRONIC COMMUNICATIONS
Following the introduction of the Transparency Regulations 2007, and in order to promote a more cost effective and environmentally
friendly approach, the Company provides the Annual Report electronically to shareholders via the Group’s website and only
sends a printed copy to those who specifically request one. Shareholders who wish to alter the method by which they receive
communications should contact the Company’s registrar. All shareholders will continue to receive printed proxy forms, dividend
documentation, shareholder circulars, and, where the Company deems it appropriate, other documentation by post.
1 2 1
SHAREHOLDER AND OTHER INFORMATION - CONTINUED
FINANCIAL CALENDAR
Date
Annual General Meeting
Ex-dividend date
Record date for dividend
Latest date for receipt of elections and mandates
Payment date for final dividend
Interim results announcement
Interim dividend payment
Financial year-end
27 June 2012
23 May 2012
25 May 2012
22 June 2012
13 July 2012
October 2012
December 2012
28 February 2013
COMPANy SECRETARy AND REGISTERED OFFICE
Paul Walker
C&C Group plc
Block 71, The Plaza, Parkwest Business Park, Dublin 12.
Tel: +353 1 616 1100
Fax: +353 1 654 6272
REGISTRARS
Shareholders with queries concerning their holdings, dividend information or administrative matters should contact the Group’s
registrars:
Capita Registrars (Ireland) Limited
Unit 5, Manor Street Business Park, Manor Street, Dublin 7
Tel: +353 1 810 2400
Fax: +353 1 810 2422
Email: enquiries@capitaregistrars.ie
AMERICAN DEPOSITARy RECEIPTS (ADR)
Shareholder with queries concerning their ADR holdings should contact:
Deutsche Bank Trust Company Americas
C/o American Stock Transfer & Trust Company, Peck Slip Station, P.O. Box 2050, New York, NY 10272-2050.
Tel: Toll free +1 866 249 2593
International +1 718 921 8137
Email: DB@amstock.com
INVESTOR RELATIONS
FTI Consulting
10 Merrion Square, Dublin 2
PRINCIPAL BANKERS
AIB
Bank of Ireland
Lloyds TSB
Ulster Bank
SOLICITORS
McCann FitzGerald
Riverside One, Sir John Rogerson’s Quay, Dublin 2
STOCKBROKERS
Davy
49 Dawson Street, Dublin 2
Goldman Sachs International
Peterborough Court, 133 Fleet Street, London, EC4A 2BB
AUDITOR
KPMG
Chartered Accountants
1 Stokes Place, St. Stephen’s Green, Dublin 2
WEBSITE
Further information on C&C Group plc is available at
www.candcgroupplc.com.
1 2 2
C & C G R O U P P L C - A N N U A L R E P O R T & A C C O U N T S 2 0 1 2
NOTES
1 2 3
NOTES
1 2 4
e
i
.
i
n
g
s
e
d
e
c
r
u
o
s
.
w
w
w
Block 71, The Plaza,
Parkwest Business Park, Dublin 12
www.candcgroupplc.com