C&C Group plc (CCR) Earnings Call Transcript & Summary

Hello and welcome to the C&C Group FY 2020 Final Results Conference Call. [Operator Instructions] And just to remind you, this conference call is being recorded. Today, I'm pleased to present Stewart Gilliland, Interim Executive Chairman; Jonathan Solesbury, Chief Financial Officer; and Patrick McMahon, Group Strategy Director. Please go ahead with your meeting.

Okay. Good morning, ladies and gentlemen, and thank you for joining us this morning. Before I take you through our key financial and operational highlights for full year '20, I would like to discuss the COVID-19 pandemic and the various actions we've taken in these challenging times. I'll then hand over to Jonathan, who will discuss our financial performance in more detail. Before commencing, I draw your attention to the disclaimer on Slide 2 of our presentation which applies to our discussion today. Turning now to Slide 3 and the actions we've taken to mitigate the impact of COVID-19. This pandemic has brought unprecedented human and economic hardship. At C&C, the group is tackling these challenges through 3 broad work streams and I'll speak to in turn shortly. Before I do, I'd like to acknowledge with sincere appreciation the dedication of our team and support of our wider stakeholders. I believe we've made good progress on our plans and have done so whilst acting in the best interest of our colleagues, our stakeholders and our community. It is at times like this that community connections and, of course, long and trusted industry relations are relied upon more than ever, and I'd like to thank all involved for their loyalty, dedication and adaptability in the face of unprecedented challenges and uncertainty. As the largest drinks distributor in the U.K. and Ireland, we're committed to emerging from this crisis in a stronger position with our core business stabilized, ready to fulfill the integral role we play in serving the on- and off-trades across the U.K. and Ireland. As this situation evolves, we believe the strength of our multi-beverage, brand-led distribution model, anchored by our local, fabric brands, is shining through and will position us well over the longer term. Turning now to Slide 4 and our people. From the outset, our priority has been protecting the health and well-being of our people, customers, suppliers, business partners and community. This objective has underpinned every action we've taken since the pandemic emerged. We have closely monitored the advice of the U.K. and Irish governments and health authorities. And consistent with their guidance, we've implemented extensive range of measures to provide the safest environment we can for our stakeholders. Social distancing measures continues to be in place across our operations, whilst those colleagues who can work from home continue to do so. We're making sure our colleagues feel supported during this uncertain time by reiterating key resources that can aid personal well-being and checking in regularly with those who've been placed on furlough. We also continue to offer our support to our colleagues with children in school as school closures remain in place. On top of keeping connected, we understand the importance of having the opportunity to develop. To this end, we have shared learning resources with colleagues whose roles have been affected by the crisis. Turning to Slide 5, our operational and commercial response. To safeguard the business of our stakeholds against these unique economic challenges, we've undertaken a series of operational measures designed to maximize the risk side -- to minimize the risk, resulting from the closure of the hospitality on-trade sector, where approximately 80% of our revenues are derived. Thanks to the excellent work of our colleagues and suppliers, the group's supply chain production facilities remain fully operational. To protect our colleagues, business partners, community and customers, this has been achieved in line with government guidelines in an environment that sees stringent ongoing audits to ensure that all areas of our business adhere to safe social distancing in compliance with other health and safety requirements. Approximately 70% of our employees have been furloughed, supported by the U.K.'s government retention scheme and the Irish government's Wage Subsidy Scheme. For those of our workforce remain in position, an average 20% salary reduction has been applied, whilst our executive leadership team have taken a 30% reduction. All remuneration has been reduced by 40% through an initial 3-month period and is currently being reviewed. We've also reduced our marketing and discretionary spend where possible. We recognize the threat and uncertainty the current lockdown poses to our partners in the on-trade, and we are engaged in supporting them wherever possible. We put in place a number of measures, including postponement of a planned price increase on our beers and ciders, a 3-month holiday on capital and interest repayments to our loan customers, full credit or "new for old" on un-broached kegs, together with a dedicated helpline to offer advice and guidance around the government support initiatives that have been introduced. We have also launched LOCAL, an app where people can buy food and drink from suppliers in their local community. We've created LOCAL to help support pubs, restaurants, bars and independent drinks merchants who certainly need to offer delivery or collection services but do not have the technology. The LOCAL app also has on-site ordering capabilities when we emerge from lockdown, allowing customers to order and pay for food and drinks from their tables to ensure social distancing measures are adhered to. To date, we currently have around 100 outlets signed up for LOCAL, and we'll seek to further expand this in the coming weeks. The continued closure of pubs, bars and restaurants has resulted in an overnight shift in consumption dynamics, which has ultimately heightened demand in the off-trade channel. To ensure security supply of our core fabric brands in these stores, we've taken action to bolster our production capabilities and supply chain to meet the increased demand within this channel. I'll provide a little more color on the latest trends later in the presentation. We have actually sought to develop and broaden the off-trade revenue opportunities for our brands and have engaged consistently with retailers in that channel to ensure increased demand is being met. We've continued with the optimization of our logistics network in Scotland, and you will have seen that we announced the investments and extension of distribution operations in Scotland last month with a new 50,000-square-foot warehouse and distribution center planned for Edinburgh. Extending our distribution operations is a positive step and will further strengthen our logistics capability, eliminate transport inefficiencies and enhance the service we provide to our customers across the whole of Scotland. We've also have been investing in our online capabilities in recognition of the lightened shift towards e-commerce transactions post-lockdown. Moving to Slide 6. We've undertaken various actions to enhance our liquidity profile and bolster our balance sheet as we navigate through these uncertain times. We've fully drawn down our revolving credit facility, which provides an incremental EUR 200 million of cash. In March, we announced a successful issue of approximately EUR 140 million of new U.S. private placement notes. The unsecured notes have maturities of 10 and 12 years and diversify our sources of debt finance. Our lending group has been massively supportive of us, and we have confirmed that they will weigh the interest cover and leverage covenants for August 20 and February 21 to be replaced by minimum liquidity covenant. We thank them for their ongoing support and advice. Given our absolute focus on cash conservation and the group's decision to avail of the government support through this crisis, we felt it wasn't appropriate nor prudent to declare a final dividend for full year '20. The Board intends to reinstate dividends as and when appropriate. We've also had confirmation from Bank of England that we're eligible to issue commercial paper under the COVID-19 Corporate Financing Facility Scheme. Whilst we do not anticipate availing of this scheme, it provides further liquidity comfort should circumstances necessitate. Moving to Slide 8 and a summary of our financial performance in full year '20. While it does seem a long few months since year-end, we're pleased with the outcome of full year '20 and the progress we made during the year. We delivered completely on the guidance previously communicated last year, and Jonathan will discuss these numbers in far greater detail shortly. Turning to Slide 9 and focusing on the key highlights for the year. Our financial performance was highlighted by EPS growth of 10.5%, representing our second consecutive year of double-digit EPS growth. Jonathan will talk through the financial numbers in more detail, but we're pleased that we're able to deliver completely on the previous guidance for the year with a revenue growth of 7.8% and operating profit growth of 10.4%. It's a testament to the execution of our long-term strategy at C&C. For this period, we guided towards operating margins at Matthew Clark and Bibendum of between 2% and 2.5%. Profits of EUR 26.4 million for these business units represents a blended operating margin of 2.4% for the period. At Matthew Clark, margins were 2.9%, and Bibendum was breakeven for the period, the first time since acquisition. Against challenging comparators driven by warm summer weather and the FIFA World Cup during the prior year, our core fabric brands performed resiliently, holding revenue flat versus last year. Encouragingly, the impact of volume declines in the Irish and U.K. cider markets, consistent with the wider cider category, were largely offset by price and mix improvements in Ireland and Scotland. In addition to price/mix improvements, organic revenue growth reflects another robust performance from our super-premium craft portfolio, which now represents 8.4% of branded revenues. Following the year-end, we were delighted to announce that, from the 1st of July, we'll be the exclusive distributor of the Budweiser brand in Ireland, strengthening our partnership with ABI, completing the portfolio of brands we now distribute for them across the island. Budweiser is #4 LAD brand in Ireland and will further bolster our portfolio alongside Bulmers, which is the #3 LAD brand. During the year, we introduced a new ERP system with our Scottish logistics network to further drive operational efficiencies within this business unit. Following some minor disruption post implementation and our commitment to resolution of this disruption, along with the launch of our Direct to Store convenience solution in the period, increased revenues by 12% in our Scottish wholesale business. We were delighted to be admitted to the FTSE 250 in December, following our primary listing switch to London. With the majority of our group revenue is now derived in sterling and the evolution of our shareholder base to a U.K. majority, this is a logical transition for us and one we hope enhances awareness of C&C within the investor community. Whilst not formally concluded until the year-end, we're pleased to announce the successful issue of equivalents of approximately 140 million in euros and sterling of new U.S. private placement notes. The unsecured notes present our first issue in the USPP market and delivered on our objective to diversify our sources of debt finance while extending our maturity profile out to 2032 on attractive terms. We invested further behind our ESG commitments in the year, highlighted by the launch of Because Life is Bigger than Beer behind our Tennent's brand, which I'll expand on shortly. In recognition of the incredible amounts of data we now transact following the acquisition of Matthew Clark and Bibendum, we further invested behind our insight capabilities, which we aim to optimize and to grow to become an important revenue stream for the group. Whilst at a relatively early stage, these capabilities are already being leveraged internally to identify emerging trends and opportunities. Turning to Slide 10 and an overview of group performance. I want to highlight the strength of the group we've built. Our #1 and #2 positions now with respect to brand categories and our distribution scale and reach across the U.K. and Ireland mean that, despite being impacted along with the rest of the trade by COVID-19, our business is structurally integral to the markets we serve. This rolls together with our local, fabric brands, puts us in a strong position to reengage with customers and consumers once restrictions across pubs, bars and restaurants are lifted. In full year '20, our core brands performed resiliently in their home markets despite exceptionally strong prior year comparators and, of course, summer weather. This performance undermines inherent strength of these brands and the investments with local consumers in their home markets. Tennent's, Scotland #1 beer, increased revenues by 5% in the period, which includes an extra 2 months of minimum unit pricing versus the prior year. Faced with tough comparators, volumes for Tennent's were down 2.7%. However, revenue growth was achieved through a favorable volume mix and increasing pricing yields. Long alcoholic drink volumes in the Republic of Ireland were down 1.8% in the year with the poor summer weather contributing to a decline in cider volumes of 3.8% in the year. Cider share of LAD fell from -- fell to 2.7 -- I'm sorry, to 12.7% compared to 13% last year. Competition remains intense with significant new product launches by major international brewers across beer and cider, timing competition for bar space and consumer retention. As a result of this, Bulmers and Linden Villiage combined volume share saw a decline to 65% over the period versus 67% last year. Revenues for Bulmers was down 8%, reflecting the channel mix performance. Our latest brand health scores confirm though that Bulmers is consistently ranked the #1 cider brand in Ireland across all measures and #3 in LAD. Across Great Britain, total cider volumes fell 6.4% year-on-year when off-trade cider volume declined at 8.2%, driving these declines. Magners' volumes were down 2% in GB but outperforming the overall cider category and gaining share across both the on- and off-trade channels. In super-premium and craft, our Dublin craft beer, Five Lamps, enjoyed another year of progress with volumes up 39% and net revenue growth of 33%. Continued success of the brand was highlighted by the opening of a Five Lamps visitor center on Dublin's Camden Street this year, which further enhances the brand's equity. In total, our super-premium craft portfolio delivered revenue growth of 9% in the year and now constitutes 8.4% of our branded net revenue. Revenue across our distribution business increased to EUR 1.4 billion, a 10% increase on the prior year. This includes a proportionate uplift from an extra month of ownership of Matthew Clark and Bibendum. That's the largest final mile distributor of alcohol and other drinks to the on-trade in the U.K. and Ireland. We now have unrivaled access to what is, in normal circumstances, the deepest profit pool in our industry. We've established networks for developing our premium specialty beers and ciders. As the industries aggregate, we are the strategic partner to a multitude of global drink suppliers to whom our model offers unparalleled access to the U.K. and Irish markets. Serving over 35,000 customers, we offer a product range of over 13,000 SKUs and execute approximately 1 million transactions per year. This provides us with incredible volume of data relating to the consumption habits within the U.K. and Irish on-trade channels. This year, we invested behind our insight capabilities and made good progress in harnessing the potential this invaluable data offers. Our ambition is to continue to develop our capabilities in this area to construct an incremental revenue stream as we monetize this data. Clearly, the majority of our profit is generated in the on-trade. And despite good recent growth in the off-trade, we'll be adversely impacted until the on-trade returns. Turning to Slide 11. Full year '20 represents the first full year of ownership of Matthew Clark and Bibendum, and we're pleased with the sustained positive progress at both businesses. We continued with the simplification, optimization phases of our program, which increased operational efficiency and helped us achieve our margin targets. Revenue for both businesses increased by 9.3% versus last year. Excluding the extra month of ownership, revenue on a like-for-like basis grew by 1.2%. Operating profit of EUR 26.4 million represents a blended operating margin of 2.4% and land at the upper end of our guidance of between 2% and 2.5%. Individually, margins at Matthew Clark were at 2.9%, which was diluted by Bibendum, which was breakeven for the year. In H2, Matthew Clark's margins were 3.2%. Our prudent focus on cash management continued throughout the year, and we further optimized the working capital at both businesses. The continued execution of our simplification process program further enhanced our operational efficiencies and acceleration of our back-office cost reductions. We're pleased that the cost base and logistics network was rightsized to appropriate levels for a low single-digit margin wholesale business. In line -- in plans to exit no margin business, we walked away from the supply of several customers, which were ultimately straining working capital with no accretive benefit. We exited the Peppermint business, which is outside the core focus of the group, as well as consolidating Elastic within our Scottish marketing business to provide a group function. Focusing on the optimization phase of our turnaround program, we made solid progress in the year in identifying revenue and cost synergies across the combined group. Procurement synergies delivered in line to our aspirations set out last year's Capital Market Day. On the progress of our brands, Magners volumes grew 60% through Matthew Clark, and our cider now represents 24% of the total cider sold versus 13% in previous year. Customer service levels remain at normalized levels with Net Promoter scores of 53.6 at Matthew Clark and 52.8 at Bibendum. On Time in Full deliveries at the end of February, 96.8%, and stock availability was at 98.3%. Overall, we're pleased with the performance of both businesses in the past year. Looking forward, we acknowledge a difficult horizon in the short term in light of COVID-19. Since the virus outbreak, we've been working collaboratively with our supplier base. We've entered into payment plans where significant balances were owed to suppliers. And we have aligned this with the portfolio of our debtor repayment plans. The pandemic, unfortunately, represents an unprecedented crisis to many of our customers who may struggle to navigate through these challenges without external support. We've endeavored to support wherever possible to our customers. This has included payment holidays as well as postponements of planned price increase. Whilst we support the current lockdown measures in tackling this health pandemic, we look forward to their conclusion and the return to working alongside our customers again and offering our unrivaled range and service. Turning to Slide 12 and the summary of our ESG highlights in the year. While our short-term focus will firmly be on the challenges presented by COVID-19, we're mindful of our commitments, and we will not lose sight of our ESG agenda, which we believe is critical to our long-term success. Our environmental footprint has always been a core focus in our operations as we rely on sustainability of our land and natural resources for our manufacturing processes. In recognition of this responsibility, we launched Because Life is Bigger than Beer campaign under the Tennent's brand in Scotland. Underpinning this campaign is a multiyear EUR 16 million investment, which enabled the introduction of pioneering green technology and strategic partnerships. This campaign encapsulates our commitments to be out of single plastic by 2022 and to be carbon-neutral by '25. We've already began work on switching from plastic packaging to card, an initiative that will remove 150 tonnes of plastic from the environment each year. Our carbon dioxide recovery system will recapture 4,200 tonnes of CO2 each year, taking the equivalent to 27 flights from Glasgow to London of CO2 out of the atmosphere. We're also pleased to be awarded a B for our Climate Change Score by the Carbon Disclosure Project in recognition of our progress in this area. We have made it a priority to engage further with ESG rating agencies to enhance the profile of our capabilities in this space. In January, we launched the first-ever Drinks Industry Sustainability Index - Trends Report in collaboration with sustainable research company, Footprint Intelligence. The report analyzed the extent to which the drinks industry is adopting sustainable strategies and practices for packaging, waste, water, emissions, energy, social impact and raw materials. And it helps identify sustainable operating practices to assist in the reduction of the drink industry's carbon footprints. This initiative aligns with our ambitious sustainability commitment of being 100% carbon-neutral by 2025, a target the group is on course to deliver. At its core, C&C is a local business, guided by local values and embedded in the local communities we serve. In recognition of this, we undertook a range of initiatives designed to better serve our local stakeholders. The global COVID-19 pandemic has presented unprecedented challenges in each community we serve and placed enormous pressure on front-line health-care workers. We recognize that there's a responsibility in all businesses to help fight this virus, and we've implemented a number of initiatives in light of this. Across our core markets, we provided hand sanitizers, bottled water and soft drinks while also supporting food banks to ensure those most vulnerable can access the basic necessities they require. We also continued with our support of local charities in the year. This includes an established partnership with Inner City Enterprise in Dublin, a charity which advises and assists unemployed people in Dublin's inner city to set up their own businesses. We also held several fundraising events during the year in support of KidsOut, a charity which provides support to disadvantaged children across the U.K. This includes a Question of Sport dinner in which over 300 people across the sector attended, raising approximately GBP 70,000. Our Tennent's Training Academy continues work in the year in supporting charities and schools with a program of training and learning sessions across the range of hospitality sectors. In full year '20, we realigned our corporate governance framework in line with the U.K. Corporate Governance Code, which was published in July 2018 and became effective for the group on the 1st of March 2019. We continued to enhance and strengthen our governance and oversight in line with the new code. We added 3 new nonexecutive Board members at the beginning of full year '20, and we're pleased that each new Board member has already demonstrated their value in their new roles and broadened diversity and experience of the Board. This was confirmed by external evaluation conducted during the year, which confirmed the Board and its committees continue to operate at a high level. With our decentralized business structure, stakeholder engagement is imperative for us, and we're pleased with the increased focus on this in the new code and, particularly, with the increased emphasis on ensuring the voice of the workforce is communicated to the Board. We have historically operated a range of engagement forums for employees. However, in line with the recommendation of the code, we have introduced the appointments of each nonexec director to a single business unit. This alignment will help Board members enhance their understanding of the business units and allow the Managing Directors of each business area the opportunity to directly communicate with the Board. Finally, as you know, Stephen Glancey retired from the Board and his role as CEO earlier this year. We are indebted to Stephen for his contribution to C&C for over a decade. I have assumed the role of Interim Executive Chair whilst we recruit our new CEO. We are advancing through this process despite delays as a result of the government lockdown measures and consequent restrictions on travel, and we'll update the market in due course. I will now hand over to Jonathan, who will take you through our financial performance in greater detail.

Thank you, Stewart. Good morning to everybody. I'll take you through a few slides on the FY '20 financial performance, conscious that the world has changed somewhat since February. A couple of points to note. There's an additional month of trading from Matthew Clark and Bibendum versus the prior year, and we've implemented IFRS 16 lease accounting from the 1st of March 2019 and have called out the associated impacts. Turning first to net revenue on Slide 14. On a constant currency basis and adjusting for 1 month additional trading in Matthew Clark and Bibendum, net revenue grew organically by 2.6%. We saw a resilient core brand performance from Tennent's, Bulmers and Magners against challenging comparator numbers. The impact of volume declines in our Irish and U.K. businesses, consistent with the wider community category, were largely offset by price and mix improvements in Scotland. Super-premium and craft revenues grew by over 9%. Revenue growth reflects the underlying volume performance, higher price points and the on-trade bias of this portfolio. This category now represents 8.4% of branded on-trade revenue, up from 7.9% in the previous year. Other owned brand performance was driven in the main by K Cider in England and Wales and supported by additional promotional activity throughout FY '20. This offset the declines in U.S. brands, where volumes have struggled in an ever-more-crowded marketplace. The success of the relatively new Hard Seltzer category, in particular, has squeezed other categories, resulting in less shelf space available for our core brands. Across wholesale, third-party distribution and own label, we saw a 3% increase in net revenue on last year, excluding the additional month trading in Matthew Clark. C&C Gleeson delivered robust growth in Ireland again with revenues up 5%. In Scotland, on-trade wholesale volumes were impacted by the disruption from implementing from new warehouse management system at our Cambuslang depot in the first half of the year. However, measures to recover in the subsequent period helped us to deliver revenue growth of 1%. Following the introduction of minimum unit pricing in Scotland, we invested in our capability to supply and service the convenience channel directly. This has provided us with the platform to drive third-party volume and distribution. We achieved an incremental EUR 10.7 million of net revenue in this channel in the year. Revenue from contracted own-label production was up 11% on the prior year. Moving to operating profit on Slide 15. Operating profit of EUR 116.4 million represents growth of 10.4% and an operating margin improvement of 20 basis points on prior year. This was before IFRS 16 adjustments and exceptional items. Matthew Clark and Bibendum generated an additional EUR 10.5 million in bottom-line profit as the business stabilized, efficiency savings were recognized and synergies from the existing C&C branded business materialized. Operating margins for the combined Matthew Clark group were 2.4%, finishing at the upper end of our guidance of between 2% and 2.5%. In GB, operating profit was up 1.9% with pricing and mix benefits in Scotland offsetting modest declines across the beer and cider. Ireland's profitability was broadly flat for the year, which was a positive result considering the challenging backdrop in citing the strong 2018 summer. Operating profits for the International division were marginally down the prior year with reduced cost infrastructure across both our North American and export businesses offsetting the volume declines. On Slide 16, we can see the continued strong underlying cash generation with free cash flow conversion at 103.5% of EBITDA. Working capital management was, again, a focus with reduced stockholdings across our depot network, improved cash collections and enhanced supply terms generating a working capital inflow of EUR 47.6 million. This was largely from Matthew Clark and Bibendum. We continued our lending support in the on-trade across Scotland and Northern Ireland. These loans are primarily secured by freehold assets and are conditional from the outlet purchasing our products over the tenure of the agreement. The effective tax rate was 12.0% for the year, assisted by a deferred tax asset created on the onshoring of intellectual property. Finance costs are up in the prior year. The group's euro term loan was drawn down in July 2018, together with the extension of the group's receivable purchase program to include Matthew Clark and Bibendum. Cost increased year-on-year as both facilities were in place for the full 12-month period. Key capital expenditure projects included: investment in the wastewater treatment plant facility at our Wellpark brewery in Scotland; investment in our Five Lamps microbrewery visitor center in Camden Street, Dublin; Clonmel drainage and underground pipework rehabilitation; Scotland logistics and warehousing systems; and investment in ERP upgrades across Matthew Clark and Bibendum. Looking at net debt on Slide 17. We ended last year with net debt of EUR 301.6 million, having paid our final FY '18 and interim FY '19 dividends and absorbed the EUR 116.5 million of short-term debt from the Matthew Clark acquisition. We've significantly reduced our net debt position in the year by EUR 68 million after dividends and share buybacks. Robust cash generation through rigorous working capital management has resulted in net debt position at year-end of EUR 233.6 million, giving a net debt EBITDA of 1.77x, which is well ahead of our target of 2.0x. We invested a further EUR 10.7 million in Admiral Taverns in the year, increasing the estate to over 1,000 outlets. Share buybacks were undertaken to nullify the dilution of the scrip dividend. And the final FY '19 and FY '20 dividends were paid. Given the quantum of exceptional items, I wanted to call out a few points. The group has accounted for the COVID-19 pandemic as an adjusting event in FY '20 and has prudently made provisions of EUR 47.6 million. This relates to a provision against trade receivables and advances to customers of EUR 19.4 million and EUR 5.8 million, respectively; a provision against short-dated stock of EUR 10.6 million; a provision for contracts now deemed onerous of EUR 9.4 million; and the writeoff of an intangible asset of EUR 2.4 million. These are all as a direct consequence of COVID-19. We've also taken an impairment of EUR 34.1 million on our Woodchuck brands in our North American business. Despite some signs of volume growth last summer on the back of innovation, the Woodchuck brands continue to struggle in ever-more-crowded marketplace. The overall cider category in the U.S. remains under pressure. As noted in the half year, the group terminated a number of long-term supply contracts, incurring a cost of EUR 4.4 million. These apple contracts were deemed surplus to requirements following a structural change in the market. The remainder of the exceptional items relate to restructuring principally in Matthew Clark and Bibendum and changes to the carrying value of property, plant and equipment following the annual valuations. Lastly, the group disposed of its equity investment in a Canadian company for cash proceeds of EUR 6.1 million, realizing a profit of EUR 2.6 million on disposal. The group also disposed of its interest in Peppermint Events at a loss of EUR 1.7 million. Finally, on Slide 19, I've outlined our balance sheet and liquidity position. As you can see from the results, we entered the COVID-19 crisis with good momentum, a strong balance sheet with net debt EBITDA 1.77x. We've also fully provided for COVID-19 balance sheet exposures. As we have communicated and as Stewart has noted earlier, we've taken several actions since the start of the pandemic to improve our liquidity, which should be more than sufficient for the group's current and expected needs. Current liquidity is approximately EUR 550 million, of which cash and undrawn revolving facilities is EUR 405 million in addition to approximately EUR 145 million undrawn on our committed receivables purchase program. In terms of our debt maturation, under EUR 35 million is payable within 12 months with long-dated maturities on our RCF and our USPP. In addition, we have access to further facilities to our eligibility to the U.K. COVID corporate financing facility or CCF (sic) [ CCFF ] as it is known, as well as an additional EUR 300 million of undrawn facilities with our banking group. I will now hand you back to Stewart to take you through our current trading estimate and outlook. Thank you.

Thank you, Jonathan. So turning to Slide 21 and a summary of our current trading. The U.K. and Irish on-trade channels were mandated to close approximately 3 weeks into our current financial year. Given approximately 80% of our group revenues are derived from this channel, the lockdown measures have had obvious material implications on our business and earnings. We sought to mitigate the downside earnings risks emanating from the lockdown measures with a series of cost reduction and capital preservation measures. Compensation for loss of revenue to some degree has been the significant boost in demand in the off-trade channel, which has emerged from the immediate shift in consumption dynamics. Our core brands have experienced momentous growth in this channel recently. In April and May, volumes in the off-trade for Tennent's in Scotland were up 41%; Bulmers in the off-trade, up 62%; and Magners in GB in the off-trade, plus 25%. To further capitalize on this positive trend in the off-trade, we have reallocated resource behind our Take-Home proposition and sought to optimize our business model in this area. In recognition of the reduction in consumer visits to grocery and convenience stores, we prioritized larger pack SKUs to discourage need for frequent shopping trips. We've also rationalized our SKU range to reduce changeover time, enhanced capacity in our production sites as well as offering Direct to Store deliveries to ensure the availability of a supply of our core brands. The focus on this channel has allowed us to pull forward product launches scheduled for later in the year with Tennent's Light now launching in July. Already available in the on-trade, we have now secured off-trade listings on the -- July launch will be supported by a full suite of promotional activity. Whilst we're pleased to have this source of revenue during these uncertain times, we acknowledge the profit margins in the off-trade are not as strong as those in the on-trade, and that overall volumes are in net decline. Consequently, the business has then experienced an average loss of EUR 6 million in each month that the on-trade has been closed with an underlying trading cash burn of EUR 7 million per month net of furloughing employee support of EUR 5 million. Turning to Slide 22. And given that this is the most challenging period for our industry and economy for generations, it's not possible to provide a firm outlook on performance at this time. There are clearly a number of unknowns, primarily the duration of this crisis and the impacts on consumer behavior upon the reopening of the on-trade. However, there are a number of things we know and are confident about. Our people remain our core asset, and we continue to operate stringent safety measures to protect the health and well-being of our colleagues. We believe we have a robust capital structure now with diverse sources of financing that will stand us in great stead through this crisis. The confirmed eligibility of our inclusion of the CCF program provides further comfort in that respect. But we're not complacent about our position and have taken the decision to suspend our final full year dividend among other actions outlined earlier in the presentation. Our objective is to emerge as a winner in our sector. The profits pooled will look different, so too our competitive landscape. We entered this crisis from a position of strength with recent learnings taken from the rescue of Matthew Clark and Bibendum business. And we believe we will emerge a leaner and stronger business. We acknowledge that the current disruption unfortunately represents an unprecedented threat to the commercial viability of many of our stakeholders within the hospitality sector. We'll continue to offer our support to our customers where possible and work collaboratively on innovative solutions as we adjust together in the new dynamics post-lockdown. Turning to Slide 23 and a summary of our strong fundamentals. Our business model has evolved and diversified over the last few years to a position where we're now structurally integral to the markets we serve. We're confident in the resilience of this model now more than ever, further bolstered by the emergence of recent consumption dynamics. In the off-trade channel, we have witnessed a boost in demand to establish recognized brands as consumers choose products they know and trust. We anticipate a similar shift in the on-trade when outlets reopen and previous trends of product exploration will dissipate the benefits of well-established brands. This drop -- backdrop will be optimal for our core fabric brands, which enjoy #1 and 2 positions in their respective markets. We recognize that many new trends have evolved as we adapt to life after lockdown. As the largest drinks distributor in the U.K. and Ireland, we're well placed to identify these emerging trends from a significant volume of transactions. And we'll continue to invest behind our insight capabilities, so we're well-placed to capitalize on the opportunities manifesting from these brands and trends. The lockdown measures implemented over the last few months have reinforced the world pubs, bars and restaurants in our culture and is difficult to replacing the associated convivial atmosphere that has confirmed these outlets will continue to be a core aspect of our social lives when we emerge from lockdown. Whilst we acknowledge that landscape will likely look different, we anticipate the profit pool opportunity will remain the same. And we'll aim to ensure that we're in an optimal position to further strengthen our position as a leading final mile distributor serving this sector. Utilizing our attributes of agility and dynamism, we believe we are very well-equipped to adapt to evolving opportunities as they emerge. Thank you for your time. And we'll now be happy to take any questions.

[Operator Instructions] Our first question comes from the line of Alicia Forry from Investec.

Stewart, Jonathan and Patty, 2 questions from me, please. Firstly, on the off-trade, could you discuss trends that you're seeing in the supermarkets perhaps compared to some of the other off-trade channels that are still open in your market and particularly, how have margins evolved in the off-trade? You talk about larger pack sizes. I would think that might be a downward pressure on margins, but perhaps you can comment further. What changes in the off-trade do you think might be permanent in this channel even after the on-trade reopens? And then my second question is around the on-trade and logistics when that eventually reopens. Presumably, there's some lead time required there to handle that. And I know that BBPA has just announced an industry-wide system for handling the orders when this reopens. So perhaps you could explain a little bit more about what might be involved for C&C once that part of the industry starts to open up again.

Okay. Well, I'll take the first question around the off-trade. And then maybe, Patty, if you could respond on the on-trade. So I think what we're seeing in the off-trade is 2 quite significant trends: a big shift to online and a big shift to small stores. So if you look at the latest market data, I think you saw the independent channels was plus 60% on the last 12 weeks. I think the co-op was growing at plus 30%. And so that has an implication both from -- so both an online and small channel perspective does derive different packs, different pricing strategies. Overall, I don't think that's going to change much. I think pre-COVID, the combined -- combination of convenience and online was something around 16%, 17%. It's now closer to 30%, and I think a lot of that shift will actually stay. I think the retailers have done a very good job in actually expanding their capability in a relatively short period of time to double the capacity for home shopping, and that's still capped. And I think people have seen the benefits of that. So it will actually change, say, our pack and pricing strategy. Yes, there has been a move to large packs, but we're not seeing a huge dilution on margin from where it was previously because there's less promotional activity taking place and also because of the efficiency we're driving from the supply chain by focusing on pure SKUs is actually helpful as well. So I expect that what we see in terms of bigger packs from the big brands that consumers know and trust, that trend again will stay there. Patty, do you want to comment on the on-trade?

Sure. Sure. Yes. In terms of logistics, you're dead right that there's going to be a bit of a lead time involved. It's important to point out though, we never -- we haven't fully closed Matthew Clark even during this period, so we've kept a skeleton crew in there. And the back office is clearly engaging with suppliers and with customers. But even on the logistics side, actually, we've had all of our depots open, so we're going to be able to hit the ground running. We've been trying to utilize some of our vans and trucks and collaborate with ABI actually to support co-op. So look, we think we're -- because we didn't fully shut down, we think we'd be able to respond very, very quickly. We are, clearly -- in Ireland and the U.K., we're part of the industry solution. In Ireland, we're one of the big 4: Diageo, ourselves, Heineken and Irish distillers, the Pernod. And we're working together as much as we can to provide an industry solution throughout to tackle the practicalities involved in getting the on-trade back up and running. A point to make, and I know it's not lost on anyone, but the experiences that we gained 2 years ago in Matthew Clark that had to effectively restart that business and had to kickstart the working capital cycle, make sure we have stock on hand, making sure our On Time in Full order measures are all hit, they are going to be 2 key KPIs for us going forward. So I think we're well set up is the short answer, Alicia.

And the next question comes from the line of Ewan Mitchell from Barclays.

A couple of questions from me. First one, just diving a little bit more into the off-trade. How do you think -- with the off-trade most likely to remain a more significant part of the overall market, how you're going to change or alter your strategy in a slightly more longer term around Tennent's and Bulmers, which have traditionally been much more on-trade focused? And secondly, the long-term or mid-term margin target of above 3% for Matthew Clark and Bibendum, are those still achievable in a lower off-/on-trade world? I know you mentioned that you expect the profit pool to be broadly similar to what it was before. But if we're seeing less consumer travel, less consumers venturing to the pub, do you not see that channel shift changing and people consuming in new manners? And how do you see that playing out for Matthew Clark and Bibendum?

Okay. Again, thanks, Ewan. If I take the first question on the off-trade, and then Patty, maybe just want to comment on the margins around the wholesale business. Yes, I think in terms of the off-trade, I mean, clearly, a lot of that shift that's taking place will continue there for the foreseeable future. So we do need to find a way of how we improve our margins from the channel. I think some of the things we can do around innovation, so again, bringing -- the first of that is Tennent's Light, which we launch in July. That will offer a premium opportunity both for the trade and for ourselves. And we're looking to actually really accelerate the pipeline we have of new products innovation focus on this channel. And we will look to build our capability across the business. So I think we acknowledge now that it is a bigger part of the business going forward. What we are reassured by is the growth that we've seen in the past few weeks, so plus 41% on Tennent's, plus 62% on Bulmers and plus 25% on Magners. So we know that consumers do value and want our brands. And so we need to capitalize on that and think through how we innovate and grow our margins. Patty?

Yes. Yes, look, we're not giving guidance, I suppose, in terms of medium-term targets. What I would say though specifically for Matthew Clark and Bibendum, getting back to where we've positioned the business now, which had Matthew Clark with EBIT margins of 3.2% in second half of last year. That was hard fought. We had to write out the business quite a lot over the last 2 years. An enormous team effort went into it. We laid out the plans hopefully pretty clearly on the Capital Markets Day. And we've delivered against them, both on the margin side, and we've exceeded our own expectations, I think, around the cash and the working capital improvement. Clearly, we don't know what the on-trade is going to look like for Matthew Clark in a few months' time when it does open up. We don't know what the competitive landscape will look like. But certainly, we've got form in being quite nimble, being very dynamic. And it's in the DNA of Matthew Clark to adjust to the opportunity. So I think our medium-term targets, as much as we're not confirming guidance, I think we'll strive to get back to what we fought hard for, for last year. So yes, I think it's a long-winded way of probably saying, look, in a wholesale business, 3% margin is our aspiration. And it was last year. It will be again in the future. But clearly, there's going to be a rough patch in between.

And the next question comes from the line of Cathal Kenny from Davy Research.

Three questions from my side. Firstly, on the off-trade. Just interested to know what the implications for capacity at your 2 main manufacturing sites, Clonmel and Wellpark. That's number one. Secondly, as the on-trade reopens, can you talk about the scale or the requirement around working capital investments? And will suppliers play a part in that? And thirdly, a question on Ireland and Budweiser, just the onboarding of that contract. Perhaps you could give us some color on the mix within that business in terms of on/off?

Okay. I'll stress out -- again, I'll take the off-trade capacity question. Jonathan, do you want to answer on the on-trade working capital?

Yes.

And Patty, can you pick up on Ireland, Budweiser? In terms of off-trade capacity, we had taken a number of short-term actions, as I've said, by reducing the SKU count quite significantly. That's reduced changeover times, and we're running at almost full capacity. We still do have some spare capacity in bottles, and we're looking about how we can actually capitalize on that. We're also looking at how we may be able to adjust some shift patterns to actually increase our capacity still further. And then we're currently working on a -- what sort of shape of the capacity we need in the future and what CapEx that requirement may need to do that. So we see this growth sustaining, and we need to find ways of how we can do that. In addition, we've managed to get some external contract packaging in place, which, again, will help us in terms of meeting demand over the foreseeable summer period. Jonathan?

Yes. Yes, in terms of working capital in the on-trade, I mean, yes, so current situation is -- what we're doing is we negotiated with the larger suppliers with the likes of Diageo and Pernod, and that's as we've agreed supply payment plans. And on the customer side as well with the big national accounts, the likes of Stonegate and Wetherspoons, likewise, we've agreed repayment plan. So the objective here, Cathal, is to balance supply deferrals with overdue receivables largely so that we won't pay the larger suppliers until we actually get paid from the customers. And that's both a working capital objective but also to manage the credit risk. I think, broadly, what you will see -- I mean, we've made huge strides in working capital management over the last couple of years, particularly in Matthew Clark. And we've operated to negative working capital. I think what you're going to see at least in the short term is some kind of rebalancing of working capital. If you look at it currently in May, largely, the supply deferrals are matched by the overdue receivables, and there is a tax deferral, which is there as well. But if you look at the total working capital cycle, including stocks, it's broadly neutral. And I think that's where it'll be in the short term, Cathal.

Okay. I'll pick up the question on Budweiser to start with, Cathal. And again, look, we're working through the numbers. Clearly, the world has changed quite a lot since we made the announcement of getting Budweiser in Ireland, which we're delighted with. There's quite a bit of investment that needs to go into the brand, I think, to bring it back to former glories. The draft numbers, as reported externally that we're verifying ourselves now, would indicate that about 45,000 hectoliters on drafts. There's an awful lot sold through, and the vast majority of it, 70 -- about 70%, I think, has been historically sold through the off-trade. And there is a bit of work to be done in the off-trade to protect that volume and extracting more value add, but particularly in the runup to minimum unit pricing in Ireland. It remains to be seen whether the minimum unit pricing is closer or further away because of COVID, and there are compelling arguments on both sides. But yes, I think that the profile and the shape of the volume is likely to change, Cathal, over the next 18 months. Clearly, we hope to grow, but I think we need to address the -- probably the over-promotion of Budweiser in the off-trade first.

[Operator Instructions] The next question comes from the line of Damian McNeela from Numis.

A couple from me, please. First of all, Jonathan, can you give us a bit more insight into the actions that you took around Matthew Clark and in terms of working capital in the year just gone? And then looking at the sort of the -- you've made sort of good gains for your own brands in the distribution business. So I was just wondering whether -- what the opportunity looks like now in light of COVID-19, and whether that actually you've got sort of bigger aspirations or bigger targets for your own brands in that channel going forwards the result. And then just a last one. Is there any update you can provide on the new chief exec as well, please?

Jonathan, do you want to take working capital, and I'll pick up on the gains in distribution and the CEO.

Yes, sure. Damian, I mean, in terms of the actions taken in Matthew Clark over, I guess, you can say, the last 18 months, it's not rocket science. It's really just a focus on all aspects of working capital. So one, on stock, it was really looking at stock levels across the footprint, across the network, and making sure we got appropriate stock in the various depots. In terms of supplier payments, I think that's perhaps where we made the bigger progress. And when we bought Matthew Clark back in 2018, most of the suppliers had us on cash with order. And then we've worked through repayment plans over a period of 6 to 8 months. We stored credit insurance. And then we'll be able to, at the end at that point, to move on to supply terms, which are much more competitive for us and competitive to industry. So it was the case really in supply terms, extending those. And then a focus on credit, on the customer side and collections and incentivizing salespeople to collect the cash as well as to do the sales, so nothing extraordinary. We had a little help with the [ raw debtor ] securitization or receivable purchase program. That obviously allows you to get your cash in from your -- from the customers in advance of typically longer payment terms, mostly from the big nationals. So it's really a focus, Damian, across all 3 components of working capital.

Okay. I'll come on these -- Matthew Clark and the distribution gains aside, I mean, I think we're delighted with the progress we're actually making. As I said, the Magners volume grew by 60% through Matthew Clark last year. And our cider now represents 24% of the total cider sales, which is almost double its share from the previous year. I mean, we still have very ambitious targets. I don't think they're going to change. And we expect we'll continue to grow that. But we also need to be mindful of that, at the end of the day, we are a wholesaler, distributor, and we have to be mindful of customers and brand choice. But we'll continue to have that focus, and we see ways of how we can grow that share and the growth of Magners through that channel. Regards the CEO recruitment process. I think we were delighted with the interest that we've had within the role. We really are at the very final stage of the process. We've got a very short list of candidates who've gone through an extensive assessment and interview process. But most of that has been done remotely. And so the final stage really is to get the opportunity to meet up with these people in person. And I would hope that can be done in the very near future. And as soon as we can get to a position, we'll advise the market.

The next question comes from the line of Patrick Higgins from Goodbody.

Thanks for taking my questions. Just a couple, if I may. So firstly, you flagged an average profit loss of about EUR 6 million in April and May. How should we think about the performance between the distribution businesses and then the branded business given how strong growth within the off-trade is deemed for the branded business? Secondly, you mentioned you're working with U.K. and Ireland authorities. And could you just talk about some of the support you have received maybe outside of furloughing so maybe specifically on cash flows? Have you got deferrals and stuff like excise duty, back payments? And if so, could you maybe quantify the benefit of those in FY '20? And then final -- one final one. You mentioned earlier in the Q&A and -- it's a trend across SMB towards well-known trusted or fabric brands, as you call them. Obviously, that's been important to your strong retail performance. But how should we think about the benefit of that trend to your brands as the on-trade channel reopens in the coming months?

Okay. Again, Jona, can I -- Patty, maybe you take the first question around sort of the distribution and branded business. Jona, if you pick up on this, before we go [indiscernible]. I'll pick up on the final one about brands.

Surely. Yes. So for April and May, we're saying our EBIT loss is EUR 6 million. And look, another way to look at that is C&C's old businesses like its branded businesses in Ireland and Scotland, they're broadly EBITDA neutral or slightly positive in that period. So the entire loss, if you like, is attributable to our distribution businesses, and more accurately, I suppose, our recently acquired businesses don't have an off-trade channel. Remember, Matthew Clark is 100% on-trade. All of the other businesses, to some extent, have an off-trade income stream. That's probably the most useful way to look at it.

Yes. I mean governments have been very helpful across the board, both in the U.K. and Ireland. As you mentioned, the furlough scheme, yes, we've utilized that across our geographies. In terms of deferments from Irish tax authorities, yes, we have computed deferment on a rolling 2-month basis. So they've been very helpful in terms of giving us that advantage there. In terms of quantification, I'm not able to disclose that. But Patrick, it's effectively a 2-month rate in duty deferral but having to apply on a monthly basis to roll it forward.

Okay. Thanks, Patrick. And really thinking about the brand position. As I said, we're very reassured by the strength of our off-trade performance, the Tennent's plus 41%; Bulmers, plus 62%; Magners, plus 25%. But all brands, those brands operates as #1 and #2 within their respective segments. As the on-trade opens up, we're expecting that they really are going to focus on a few products, a few core brands, and we think that will be extremely helpful to us. So we would expect that, as the trade opens up, that our brands will gain share in that immediate period because they will stock the brands they know that consumers actually want to purchase and drink. So we're hopeful as and when it gets up in running, we'll get the same sort of response we've had in the on-trade that we've seen in the on-trade -- in the off-trade, yes, sorry. Okay. So I think -- unfortunately, I'm going to have to leave it there for now, guys. Thank you very much for joining us today. I think you can see that we had a very strong year, but that's been put behind us now. And we're very much looking forward to how we actually address the various challenges. We are sure where we are in terms of our brand strength, and we're hopeful as the on-trade opens up that, with our agility, our local fabric brands and our ability to respond quickly that we can capitalize on whatever the new opportunities are. So thank you very much for joining us. Cheers.