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

Welcome to the C&C Group plc Financial Year 2021 Half Year Results Conference Call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Mr. Stewart Gilliland, Interim Executive Chairman; Mr. Patrick McMahon, Chief Financial Officer; and Mr. Ewan Robertson, Finance and Investors Relations Director. Gentlemen, please go ahead with your meeting.

Okay. Good morning, everybody. Before I review our key financial operational highlights for the first half of full year '21, I'd like to discuss the measures we're taking to secure our market position in the short term, while positioning our business to emerge from this global crisis as a clear winner in our sector over the long term. I'll then hand over to Patty, who will review our financial performance in more detail, before discussing our current trading and outlook and then opening the call to your questions. Before commencing, I draw your attention to the disclaimer on Slide 2 of our presentation, which applies to our discussion today. Turning to Slide 3. C&C is a business which has developed uniquely strong fundamentals, driven by our vertically integrated, brand-led distribution model. Our 3 core local brands, Bulmers, Magners and Tennent's, hold a special place in the hearts and minds of regional, national and global consumers. Bulmers is the Ireland's #1 cider; Tennent's is Scotland's favorite beer; and Magnus is the #2 apple cider in the U.K. and one of the few truly global cider apple brands. C&C provides a unique route to market platform for local and major international brand owners, with market access to over 35,000 licensed premises across the U.K. and Ireland. With reliable strength, scale, service and distribution reach as the largest independent alcohol distributor in the U.K. and Irish hospitality industries, our business is structurally integral to the markets we serve. We will play a key role in the post-COVID-19 recovery of these markets. As we look to the future, we expect last-mile distribution will become increasingly important, both for our suppliers and customers. While there are significant challenge for the license on trade at this point in time, which are materially impacting our ability to trade, and consequently, our profitability, we fundamentally believe in the resilience of our brand-led distribution model and its importance as the bedrock of our strategy for the future. We have implemented measures to secure our position to see us through this crisis and believe the strength and depth of our relationships and the investment we continue to make in the sector underpin our long-term position as a leading supplier to the on-and-off trades in the U.K. and Ireland. Now turning to Slide 4. To set the context of today's presentation and our financial performance, it's important to note that the outbreak of COVID-19 coincided with the beginning of our financial year. This meant that the entire 6-month performance period being reported today has been impacted. Before Patty discusses our financial performance in greater detail, I'll review our half 1 performance in the context of 4 key themes which are central to our confidence in our long-term success. They include how we navigate through COVID-19 and supporting our stakeholders: our focus on driving group profitability, with a partial reopening of the on-trade in our core markets; maintaining consistent customer service levels despite the market disruption; and delivering market share gains as the off-trade channel has grown. In addition, we have continued to deliver on an objective to add complementary distribution partnerships, including global brands, while also continuing to drive innovation and launch new products for the future. Turning to Slide 5 and our response to COVID-19. As we navigate our way through this unprecedented challenge for our industry, we rely on our long and trusted relationships with our industry partners. At the same time, we're supporting those at the lines, which is both the right thing to do and also good business. Our top priority continues to protecting our colleagues, business partners, customers and the communities in which we operate. This has been achieved in line with government guidelines in an environment we see stringent ongoing orders to ensure that all areas of the business adhere to safe social distancing and compliance with all health and safety requirements. And as we speak, all our sites have now been certified as COVID-19 compliance. While lockdown restrictions have recently been strengthened in both the U.K. and Ireland, the ongoing excellent work of our colleagues and suppliers sees the group's supply chain and production facilities remain operational and ready to serve our customers. We have commenced the phased return of colleagues to meet the increased demand that comes with the gradual reopening of the on-trade. And we produced short films and return-to-work instructions to familiarize and educate returning staff with the increased safety measures and layouts we've put in place across all our sites. Social distancing measures remain in place across our operations, while those colleagues who can work from home continue to do so. The number of employees on furlough significantly reduced as the on-trade began to reopen in July, and this continued to reduce in August and September. We continue to support the hospitality sectoral measures to facilitate reopening at the appropriate time. In Scotland, measures include new for old keg replacement. Tennent's has launched Dedicated to You, a multichannel campaign which gives a pint to Tennent's Lager or Tennent's Light to consumers in Scotland. This has been facilitated by the provision of a free keg to around 2,000 outlets across Scotland, helping customers' cash flow and encouraging footfall through outlets in the reopening of the hospitality sector. The rollout of our local app continues to facilitate home delivery, click and collect, table service, cashless payment for our customers and the collecting of the consumer data, which is required following reopening. In Ireland, we launched C&C Hygiene, an initiative providing funding for preopening and start-up costs for our customers, with over 500 pubs and restaurants being supported. This offers a central hub with safety standards and certification for the hospitality sector. The initiative also offers items to facilitate safe opening and continued operation, including divider screens and hand sanitizers, signage and foot handles for doors. In Matthew Clark and Bibendum, supporting measures include increased flexibility in delivery days and times, tailored promotion and pricing plans, working with our supply partners to support the sector as it reopened, new guest checkout facility on our e-commerce platform and a simplified online process for new account openings. Crucially, to ensure the group's ability to trade effectively through its extraordinary period, we secured our liquidity position, managed working capital, extended our borrowing facilities and on minimizing available cash flow -- sorry, maximizing available cash flow. We continued to focus on operation -- optimizing operating costs to better align our cost base with the operating environment. We are well positioned despite the obvious headwinds and short-term uncertainty across the hospitality sector. As the pace of recovery varies, we continue to deploy resources to meet the increased demand in the off-trade whilst maintaining flexibility to quickly adapt and support the on-trade as and when restrictions are eased. Turning to Slide 6 and the progression of the on-trade in our core markets. It hardly needs reminding that the on-trade was effectively closed for April, May and June. We are very much in the midst of this closure when we reported our results in June. What is important to highlight, and consistent with our assertion of the central role in serving the U.K. and Irish hospitality markets, is that the business reacted quickly in July, August and September as the on-trade reopened, which was reflected in a substantial increase in revenue and an immediate return to profitability. We've witnessed a large number of trends as the on-trade has reopened. For example, city center business recovery is lagging the rest of the market, driven by continued home working. In addition, we've seen a strengthening in established and trusted brands. And as we can see, revenue growth lags distribution growth, with throughput continuing to be impacted by social distancing and resulting to reduced footfall. Using our Matthew Clark and Bibendum businesses as a barometer, in August, we delivered to 76% of the outlets we delivered to in August of the previous year, while revenues achieved a 62% for the prior year. That said, we're pleased to be engaged with our on-trade customers through supporting them and through working through this challenging period together. It's worth reiterating that our platform and commitment to serve the on-trade is admirable, as is our ability to quickly react and fulfill the needs of our customers. This is being recognized by the on-trade, where we've gained significant increase in the number of Matthew Clark accounts wins year-over-year. July through to September saw an increase of 66% year-on-year as customers seek security and look to trade with our distribution network. Turning to Slide 7. We pride ourselves on the quality and consistency of our customer service. Despite the detrimental impact this pandemic has had on our industry, our customer service index scores remain in the top quartile, which is industry leading. By redeploying resource throughout the height of the pandemic, the parts of the business servicing the off-trade and effectively managing any supply issues, we ensure that our On Time in Full delivery rate was maintained at over 94%. Looking at the CSI index for July, with the most comparable sector being leisure at 80.2, Matthew Clark and Bibendum each outperformed the sector with scores of 83.1 and 84.5, respectively, in August. As evidenced by our On Time in Full delivery analysis, as the on-trade reopened in July, we are on hand to meet the demand of our customers, achieving average group base of 94.6% in August. Our leading customer service levels and commitment to service excellence was recognized by the drinks industry in the period where Bibendum has been rewarded Drinks Business of the Year at the 2020 Drinks Business Awards. We fundamentally believe that a clear and consistent commitment to serving our customers is what will continue to set this business apart from its peers into the future. Turning now to Slide 8 and the strength and resilience of our core brands. Through the uncertainty of recent months, our core brands have consistently demonstrated there on having strength and stronger [ penetration ] with consumers in their local markets. Each of these brands, Bulmers, Magnus and Tennent's, outperformed the wider off-trade market in the 6-month period. This is more than important than just near-term performance. It ensures we remain connected with our consumers, and it strengthens our brand position -- the proposition in the period ahead across both the on-trade and the off-trade. Looking in more detail at the first half performance. Coinciding with the closure of the on-trade was an immediate shift in consumption dynamics, which resulted in an increased demand in the off-trade channel as consumers looked for value from brands they know. To capitalize on this behavioral shift, we've reallocated resources behind our Take-Home proposition in order to optimize our performance in this channel. Tennent's off-trade volume growth was 38.8%, while the wider off-trade lager market increased share by 31.9%. In Ireland, Bulmers' off-trade share grew by 53.8%, while the long alcohol drinks category increased by 46.7%. Lager's also outperformed the off-trade cider category, growing volume ahead of the market with 27.4% growth versus the off-trade cider volume growth of 25.5%. With the festive period approaching, we expect seasonal increased demand in the off-trade. We're well placed to support our customer base with plans in place to ensure visibility and availability of our brands in store for our customers in both channels. To further our convenience offer, we've launched Tennent's Reward, a retailer loyalty scheme that supports stores' bespoke planograms, designed specifically for shoppers in Scotland, and enhances sales and profit for the own retailer, supported by promotional store material from our team. Our direct-to-store operations delivered strong availability of key brands and new online ordering platform. We'll offer further support for convenience channel in these unfixable times. During the crisis, Walker & Wodehouse, which specialized in sales to independent retailers, and Bibendum off-trade, which services grocery multiples, has met increased demand as consumers sought out wine experiences at home. The strength and progress of our brand-led wholesale model also continues to be demonstrated in each of our core markets, with major international brands seeking to partner with us and optimize the reach of their brands through our distribution capabilities. In Ireland, we strengthened our partnership with ABI Inbev, beginning exclusive distribution Budweiser, the world's biggest alcohol brand, on the island of Ireland. With the addition of Budweiser, C&C now has exclusive distribution at ABI's complete beer brand portfolio across Ireland. Distribution began in July, with Ireland chosen to launch market of a new Budweiser brand identity worldwide. In the U.K., we were chosen exclusive distributor and representative for -- of Tito's Handmade Vodka. Tito's is #1 selling spirits in the U.S. as a premium vodka, is the fastest -- as premium vodka is the fastest-growing bottled category in the U.K. We will expect to and excited to be part of this brand such as Tito's and make this brand available to consumers across the U.K., highlighting the distribution strength and reach of our Bibendum business. We also secured exclusive distribution agreements with a host of iconic global wine brands, including Ferrari, Quinta De La Rosa, Giovanni Rosso, Félines Jourdan, Flint Vineyard and Neudorf Vineyards. Turning now to review of the first half performance. Slide 10 sets out a summary of our financials for the first half. We won't face for the first 6 months of anything other than challenging, and it's clear from our performance as the slide sets out. Comparing the first half of this year with the prior year in many respects is pointless given the scale of the change in the broader environment year-on-year. If we look to positives on the path forward, the business returned to profitability and cash generation during July and August. Patty will review our financial performance in greater detail shortly. Looking at Slide 11, it's worth taking some time to review the operational and strategic highlights in the first half and point to some of the KPIs we consider on indicative drivers of our performance over the medium term. Those included the performance of the off-trade, where our branch of plus 28% in their core markets and a focus on our liquidity and cash position. Operationally, against the backdrop of COVID-19, our focus has been to address the factors within our control: protect our people, maintain our business operations and maximize our performance. We have and will continue to deliver cost-saving initiatives. We remain an efficient operating structure and have taken action in H1 to streamline the business where we can. Initiatives will continue to be implemented over the course of the second half of the year. We are committed to maintain optimal service levels and to showing our depth and strength in the market with our customers. As mentioned, we're expanding our brand portfolio, and we'll continue to do so. In May, we announced the investments in extension of our distribution operations in Scotland with a new 50,000 square foot warehouse and distribution center in Edinburgh, and consolidation of a Matthew Clark Glasgow distribution center into the Tennent's facility at Cambuslang. In England, Wales, we're consolidating the Bibendum volumes into the existing Matthew Clark secondary depot network, driving efficiencies into our overall operation. Continue with optimizing our distribution operations to progress its step and will further strengthen our logistics capabilities, eliminate transport efficiencies, and most importantly, enhance the service we provide to our customers across the U.K. At strategic level, we have taken a number of key steps to strengthen the business in H1. First and foremost, we hasten to fill our CEO position with an experienced and proven executive in David Forde, who joins the business on the 2nd of November. He is joined on our executive leadership team by Patty MacMahon, our CFO, with invincible, understanding and experience in our business and the drinks industry. ESG perhaps is now increasingly relevant in all businesses, and we believe we continue to demonstrate leadership in this area. We're making progress on our carbon-neutral commitments and have established a Board ESG Committee to oversee progress in this area. We recognize now more than ever our commitments must extend beyond formulaic environmental targets, and this is very much a focus for the business going forward. Focus on the continued progression of the group, we're committed to our brand-led distribution model. We believe this has been a key differentiator in H1 and will sustain the business in the period ahead. We continue to invest in our IT platforms to enhance our offering for customers and launched our Bulmers Direct platform in Ireland in the first half, which now sits alongside Tennent's Direct and our platform at Matthew Clark. We're also continuing to harness data available to us through the business. We created a group data and insight function, which have unified the disparate data sources across the group and will help us enhance our performance analytics and decision-making. We will now take a closer look at our investment into these e-commerce platforms. Looking at Slide 12. As mentioned, we continue to invest in our IT capability and the use of technology to enhance our relationship with our customers and their ability to interact with us. A new online ordering platforms, Tennent's Direct and Bulmers Direct in Scotland and Ireland, strengthen our customer service offering and streamline the order process. They build on the strength of our award-winning Matthew Clark Live platform, which is awarded Best Business to Business and Best Food & Drinks e-commerce sites at the UK Ecommerce Awards 2020. As lockdown eased, we've looked in e-commerce activity, with online orders already at pre-COVID-19 levels in Matthew Clark despite overall reduced trading. We expect this trend to continue, and it's validation of our continued investment, improving our offer through this channel. Turning to data and insight. We are strategic partners to a multitude of global brand -- global drink suppliers to whom our model offers unparalleled access to the U.K. and Irish market. We serve over 35,000 customers, offer a product range of over 13,000 SKUs and execute approximately 1 million transactions per year. This provides us with an incredible volume of data relating to the consumption habits within the U.K. and Irish on-trade channel. We continue to invest behind our insight capabilities, while making good progress in harnessing the potential that this valuable data offers. Our ambition is to continue to develop our capabilities as we continue to commercialize this data. Our new group data and insight function will unify disparate data sources across the group. And in H1, we signed an agreement with SalesOut to accelerate the commercialization of Matthew Clark and [ independent ] shipment data across both businesses and our supply chain. We continue to develop our proprietary data assets, which use data science and analytics to drive performance and decision-making. We've already seen significant benefits in our off-trade supply chain through the building of bespoke forecasting and product tracking tools for major retailers. Key on-trade partners are also utilizing our bespoke consumer profiles to target geographic areas of the U.K. to target for site expansion and product launch. Finally, turning to Slide 13. We continue to invest in our portfolio to ensure we're positioned to capitalize on the evolving consumer preferences. This includes building out the portfolio across our core brands, while also adding new brands which will meet new consumer demands. We now have a range of low non-alcohol options for consumers who enjoy our Bulmers, Magners and Tennent's brands. This ensures that consumers continue to offer the brand of choice at all times and drink in a responsible and healthy way on all occasions. We've also added a rosy option of Bulmers and Magners to offer consumers an additional flavor option on their preferred cider. We've also positioned to capitalize on the growing consumer preferences for hard seltzer. We've added the Seven Summits brands we're offering in the U.K. and Ireland and have also launched our own hard seltzer, Shard, which is available on draught. Shard will be the first hard draught seltzer available on mass in the U.K. I'll now hand over to Paddy, who will take you through our financial performance in greater detail.

Thank you, Stewart, and good morning, everybody. I'll take you through the H1 financial performance. A reminder that we implemented IFRS 16 lease accounting from the 1st of March 2019, and we've highlighted here the associated impacts as we go through. So turning first to Slide 15 and a summary of our enhanced liquidity position and balance sheet flexibility as we navigate through the short-term challenges. Available liquidity at the end of August 2020 has been maintained flat in line with our 3rd of June update, with cash on hand and RCF headroom of EUR 415 million. This excludes our unutilized debtor securitization facility and any available short-term funding available to us through the COVID corporate financing facility, the CCFF. Current liquidity as of last night is EUR 387 million. Again, this excludes our unutilized debtor securitization facility and any available short-term funding through the CCFF. We successfully negotiated a deferral of EUR 60 million of our term loan repayments beyond the next 12 months, with EUR 45 million now maturing within the next 12 months. Our lenders are supportive of the business, with covenant waivers extended out until February 2022. We also have the debtor securitization facility of GBP 200 million. Associated working capital outflow of EUR 36 million in H1 is directly attributable to our level of trading over that period. The group has not drawn down on the Bank of England's CCFF facility to date. Up to GBP 300 million is technically available to us, we believe. But there was a change in some of the rules 2 weeks ago, and it's now subject to our application and further qualifying conditions. With financial security assured, we're well positioned to fund the business through this extraordinary period and the inevitable challenges we face over the coming months in the short term. Turning now to net revenue on Slide 16. As Stewart has mentioned, all of our H1 performance has been impacted by COVID-19 and the associated on-trade restrictions in our core markets. As a direct result, and on a constant currency basis, total net revenue declined by EUR 479 million or 55% in H1. More than all of that decline is attributable to on-trade business, with off-trade revenue of EUR 27 million for the period. That excludes contract revenue and revenue previously attributable to our marketing services businesses and Peppermint and Elastic. Net revenue of our core brands, Tennent's, Bulmers, Magners, was down EUR 46 million or 35%. Within this, and specifically looking at the U.K. and Irish markets, Tennent's off-trade net revenue was up EUR 4.5 million or 28%; Bulmers' off-trade revenue was up 20 -- was up EUR 2.9 million or 24%; and Magners' off-trade revenue was up EUR 3.4 million or 19%. We'll discuss our off-trade performance in greater detail shortly. Craft and super premium net revenue declined by EUR 7.1 million, 53%, in part reflecting the channel mix in this category and also a rationalization of our products in favor of big brand focus. Other owned brands include cider brands like K Cider and Linden Village in Ireland, and have an off-trade bias. 75% of revenue in this category typically comes from the off-trade. Our U.S. brands comprise Woodchuck, Wyder's and the remaining Vermont portfolio. The performance here has held up relatively well due to a more relaxed restrictions in the U.S. and more balanced channel distribution. Clearly, the most significant component of our net debt decline in H1 is third-party and wholesale business. We're the #1 independent drink supplier to the on-trade. And because of material and rolling restrictions, our distribution business, particularly Matthew Clark and Bibendum, have been impacted severely. Total net revenue declined by EUR 423 million with -- in this sector, with -- that's about 60%, with EUR 337 million of that variance coming through Matthew Clark. That's about 80% of that variance. EUR 38 million was through Bibendum and EUR 11 million on contract revenue, the remainder being -- coming through the Irish and Scottish operations. Turning now to Slide 17 and net revenue for our core brands in Ireland and the U.K. specifically. Revenue here declined by 33%, with market share and revenue growth in the off-trade only partly offsetting the on-trade declines. For Tennent's in the U.K. and Ireland, on-trade revenues were down 66%, while off-trade increased 28%. In June, July and August, on-trade revenue improved to a relative decline of 48% as lockdown restrictions gradually eased. Bulmers on-trade revenue was down 85% in H1, reflecting the impact of the Irish government's on-trade control measures as part of their plan to contain the spread of COVID-19 in Ireland. Consumption dynamics immediately shifted, off-trade revenues increased 24%. In the U.K., Magners on-trade revenue decreased 72%, with the off-trade increasing 19%. Of our 3 core brands, Magners typically has the highest proportion of off-trade sales overall. So Magners' net decline of 12.8% was more resilient versus the others in H1. Turning to net values per order. Alongside the reopening of the on-trade in July and August, off-trade growth moderated somewhat. The month-on-month progression highlighted was led by our businesses in the U.K., with Matthew Clark down 39% in August compared to a decline of 91% in May. Ireland, on the other hand was further back in the trend progression as deeper on-trade and regional and soon to be national lockdown measures remain in place. Moving to Slide 19, on operating profit and loss. Today, we've reported an operating loss of EUR 11.7 million before exceptional items for H1, declining by EUR 76.1 million on a constant currency basis on last year. In June, as part of our FY 2020 year-end presentation, we confirmed that a full lockdown, our business would lose EUR 6 million per month, and that was net of EUR 5 million of government employee support that was based on 70% of our workforce being furloughed. Furlough support schemes were not in place until April, with on-trade restrictions easing from the end of June into early July. July was our first month of profitability. As Stewart has mentioned, we continue to be profitable into August and September also. Ireland's profitability was EUR 1.6 million for the half, equating to 21 -- EUR 24.1 million year-on-year decline, while in the U.K., operating profit was EUR 6.2 million in H1, equating to EUR 18.2 million of the year-on-year decline. Of the H1 outcome, Matthew Clark and Bibendum represented EUR 19.5 million of the overall loss. That's to say, more than all of it, and that represents EUR 31 million of the year-on-year decline. Reflective of the challenges in the international markets, operating profit for our International division were nil in the period, equating to EUR 2.8 million decline year-on-year. In total, H1 benefited from temporary salary reductions and furloughed employee support to the value of EUR 18.6 million. As these supports are scaled back, we'll take action to reduce our fixed cost base and rightsize the business to align with the operating environment. On Slide 20, we see our free cash flow for the period. Overall, there was an outflow of EUR 32.4 million, which includes EUR 4 million of exceptional items. Working capital management was again a key focus area. A working capital outflow of EUR 25.7 million since the beginning of the year is a solid outcome for us. EUR 36 million of that related to our debtor securitization facility as previously mentioned. As a reminder, in June, at the time of our FY 2020 full year results, that debtor securitization outflow was EUR 45 million. Beyond the debtor securitization facility outflow, by the end of H1, we attracted about 80% of the total debtors due to us from March and has also substantially repaid all suppliers as per negotiated repayment plans. We've managed stock levels down over the period also. An important feature of our working capital continues to be the support of the Irish and the U.K. tax authorities have provided and allowing us to defer payments from earlier this year. And as at 31st of August, these deferrals amounted to EUR 109 million, with EUR 55 million repayable in our H2. In fact, as we sit here today, EUR 39 million has already been paid or repaid in September and October. We continue our lending support into the on-trade across Scotland and Northern Ireland. These loans are primarily secured on freehold assets and are conditional upon the outlets purchasing their products over the tenure -- from us over the tenure of the agreement. We were in receipt of an income tax refund in H1 of EUR 5.7 million. Financing costs are up on prior year. And costs increased year-on-year as our revolving credit facilities were granted in full in March, in part in June. In addition, the proceeds from our first U.S. private placement were received in March. We remain on track to invest EUR 10 million in capital projects this year, so H1 CapEx was EUR 5.5 million. Same projects centering around ESG-related initiatives such as the discontinuation of plastics and CO2 recovery. The CO2 capture process at Wellpark is due to be completed in H2. Exceptional cash outflows relate to financing costs, operational costs and for care returns in the main. Turning to Slide 21. Looking at net debt, which is post-IFRS 16. We started the year with EUR 326.9 million, which has increased by EUR 44.7 million in H1 to be EUR 371.6 million as at 31st of August. We invested a further EUR 6.7 million in Admiral Taverns in June to bolster their liquidity position. Clearly, dividends and share buybacks have been suspended, and strict control of cash remains an absolute priority. Considering the working capital outflow is driven by our debtor securitization facility and reflecting on our very challenging trading conditions in the on-trade and our equity investment in Admiral Taverns, we're pleased with the outcome on net debt. We entered the COVID-19 crisis with a good momentum, a strong balance sheet. And as we've communicated, we've taken several actions since the start of the pandemic to strengthen our liquidity position, which we consider to be more than sufficient to support the group's needs through these challenges. Current liquidity remains as it was in June. Between cash and RCF headroom at the end of August, we have EUR 415 million, in addition to approximately EUR 134 million undrawn on the committed securitization facility program. In securing government waivers up till February 2022, we have extended our debt maturity profile. In addition, and although the rules around accessing the CCFF have changed over the past few weeks, we believe that remain possible -- it remains a possible source of further liquidity to us, albeit not as readily accessible as it was previously. We continue to be of the view that there'll be no requirement for this facility. Now I'll hand you back to Stewart to take you through the current trading update and outlook. Thank you all.

Thanks, Patty. Now turning to Slide 23 and our current trading for the second half. As Patty has outlined, our liquidity position remains robust, and we have begun to take permanent action to rightsize our fixed cost base. Encouragingly, the business returned to profit generation in July, August and September, alongside the phased reopening of the on-trade. As lockdown restrictions have recently been strengthened in both the U.K. and Ireland, the pace of recovery, however, is varying. New restrictions in late September and October have impacted on-trade volumes and distribution points. While our level of profitability will track the size of the available on-trade market, by enhancing our liquidity position, diversifying our sources of funding, extending our borrowing facilities, reducing operating costs and maximizing available cash flow, we have the financial strength and flexibility to support the business through further lockdown measures, whether they are local or national level. Expecting increased demand in the off-trade in the coming months, we'll be well placed to support our customer base. Our commercial and operation teams are working closely with partners to ensure we meet the demand of our products in both grocery and convenience channels, which continues in place to support the supply chain as required in the lead up to Christmas. As we navigate the challenges of COVID-19, we are faced with additional uncertainty surrounding the U.K.'s exit from the EU and the potential for the transition period to end on the 31st of December 2020 without an agreed trade deal. We remain hopeful that a trade deal can be reached. And in the absence of political clarity, we've enacted our contingency plans to mitigate the impact of this potential outcome. In line with our clear focus on alcohol brands, the group has completed the disposal of noncore Tipperary Water cooler business in Ireland for a consideration of EUR 7.4 million. Looking to the second half of the year, while we expect the pace of recovery will continue to vary, as the largest independent alcohol distributor across the U.K. and Ireland, our reliable brand-led distribution platform is integral to recovering on-trade and wider hospitality industries in our core markets. Our near-term focus is securing our position and enhancing the performance of the business, while positioning C&C to deliver for customers and shareholders over the long term. We remain confident in the inherent strength of our local brands, our unparalleled route to market and the medium-term prospects for our business into the future. Thank you for your attention, and we'll now happily take your questions.

[Operator Instructions] And we'll begin with Mr. Patrick Higgins from Goodbody.

Look, a couple of questions for me. Firstly, just given the restrictions that we now have in place across Ireland and the U.K., how should we think about the EBIT loss? Is it the cash burn of the business perhaps against the kind of EUR 6 million loss that you had flagged in the first kind of lockdown scenario? And maybe an addition to that question, given the new furlough or employee support schemes that are in place, how should we think about the benefit and a new scheme for you versus the EUR 5 million benefit that you saw the first time around? And then secondly, just on the margin performance within Ireland, compared to GB, obviously, much lower. Could you just maybe talk through the moving parts behind that? Is it the mix differentials? Is there MUP at play there as well? And I suppose a final question is around MUP in Ireland. What's the progress on that being implemented?

Patty, do you want to pick up on that, please?

Yes. Yes. Well, the first one, first, Patrick. On the 3rd of June, when we were last talking to you, yes, we did outline a cash burn number in full lockdowns [ media ] per month. That was [indiscernible] a full lockdown for the other [indiscernible]. That was national [indiscernible] support from government. So there's an underlying help there per month earlier this year. I think that that's still applicable, although it's a market we're going to go into a full lockdown in some area going forward. I think the second part of your first question is very much linked to this one as well. Furlough scheme was providing us EUR 5 million support based on the 70% of our people furloughed earlier this year. Those schemes have changed. They've tapered off. And certainly, we don't know that 70% of our people furloughed. So what I would estimate going forward.

And that's answered your question. Our next question is in from Cathal Kenny from Davy Research.

A couple of questions from my side. Firstly, on the off-trade. I'm just wondering, is there an opportunity over time to capture more margin within that channel, particularly in the context of significant share gains as evidenced in H1? That's my first question. Second question, just looking into the second 6 months of the current financial year. Just any significant cash flow items that you'd like to call out. I know you mentioned tax in your prepared remarks. Just wondering, is there any other factors we need to consider? just final question relates to the onboarding of the Budweiser business in Ireland. Perhaps you can just give us a little bit more color on -- from an operational perspective and the opportunity around that.

Okay. Patty, I'll take the off-trade margin and then you respond on cash flow and Budweiser in Ireland. I think you're exactly right. The growth in the off-trade has been pretty spectacular, as you expect, during the lockdown, and we expect that to be pretty similar over the Christmas period. And if anything, Christmas is a time when people do actually go back to the brands they love. You get a lot of people coming to the market who are frequent shoppers and so you'd expect these big brands that sort of dominate sales over that Christmas period. I think we're in the process of learning. One of the things that has caused us somewhat by surprise, I think as people are shopping less frequently, they're buying more and more bulk packs more than we'd actually anticipated, which is giving us some margin pressure. So I think we've got work in hand and we are working through this with how we really do optimize our packs, our promotions and our pricing strategy going forward. So it's very much the thing that we're working on. I would hope over a period of time that with that growth, we can see a progression in terms of our margin deliveries from that channel.

I think -- apologies, I dropped off there. Apologies. But Patrick, have we answered your questions? Or where did I get cut off when I was explaining the first one?

I think we've lost the call. Our next question comes in from Ian Mitchell of...

Excuse me, we haven't responded. Okay. Patty, maybe respond on the cash flow and Budweiser in Ireland, then maybe you come back maybe to Patrick's questions.

Yes. Sorry, can we repeat all the questions? Apologies, my call dropped there, so I missed the questions.

Yes. Can you hear me now?

Yes. Apologies for that.

My other 2 questions just related to the onboarding of the Budweiser contract in Ireland. Just want to maybe get a little bit of color from an operational perspective and the opportunity. And my second question relates to cash flow items for the second 6 months of the current financial year. You called out taxes. Are there any other items you'd like to call out as well, I should be aware of?

Yes, okay. Yes. So Budweiser and [indiscernible] trying to relaunch a brand in today's conditions, and the on-trade is a challenge even for us. What I would say, look, total sales was about 42,000 hectoliters in Ireland in the first half for us, which is pretty good. That is almost entirely 90 -- 98% of it is through the off-trade. So we knew it was a mega brand there, and that's going well. So I think that the rate of decline has improved quite a lot under our stewardship already, and we only took it over from the 1st of July. In terms of on-trade accounts, we've got 400 new accounts for Budweiser up to September. And Stewart might have mentioned it already, but where their test case for a new brand relaunch for Budweiser, so we've gotten some of the new SKUs before anybody else for Budweiser, and we're getting some of the brand equity materials. So I think we've been utilizing that really well with great activation in Take-Home, in particular, if that's available to us. The second question, yes, I told that the tax deferral payments in H2 and I think we've already made EUR 39 million payments between September and October. We are scheduled to repay another EUR 15 million, 1-5, over the balance of the year, [indiscernible] and revenue have been very accommodating to us. And I'll be going back trying to -- try and get some relief on that as the conditions over the last couple of weeks have worsened a little bit. Beyond that, Rabo is probably the biggest variable rather than the data securitization facility. Like I said, we've seen an outflow in H1 at EUR 36 million. Of what we have now left, about 60% is off-trade. And that proportion for off-trade is likely to grow a little bit. But it remains to be seen how the on-trade will trade over the next few months. And ultimately, the debtor securitization trends with -- we're trading. So it's possible that, that will move a little bit in H2.

And just to follow up on the Bud, that new brand. What's the positioning of that brand?

Well, it's just a little bit refreshed brand delivery, I guess. You probably have not seen the off license. There's screw-capped, long-neck bottles now. And earlier, they just gone out with a slightly sharper focus on Budweiser. I think it's probably lost on accountants like me, but we're very focused on it. And actually, it's gone down particularly well, like I said, in the Take-Home channel over the last few months.

Our next question comes in from Ewan Mitchell of Barclays.

Just to perhaps repeat Patrick's question just so we could hear the answer to it. How should we be thinking about that cash burden and the operating loss in the second half? You mentioned the furlough support dropping off. I'll pause there and go into the other questions afterwards.

Yes. Apologies again for dropping off. Yes, I think that that's the big net difference as we look into H2, Ewan, I think where we were previously getting EUR 5 million furlough support on the basis of 70% of our people being furloughed. If we were to furlough 70% of our people again, our estimates would be that we would get maybe EUR 2 million -- EUR 2 million to EUR 2.5 million of furlough support, so slightly less than half, as attractive as it was previously. That said, we don't necessarily think or see the U.K. going into a full national lockdown again. And these numbers are predicated, of course, on a full-on trade lockdown. So that gets me to probably about EUR 10 million net in a full lockdown scenario. It's actually easier for me to give the binary answer of what a full lockdown looks like than the shades of gray off it. But yes, I think that's the answer.

Very helpful. And then just sort of jumping into the Matthew Clark business. E-commerce, you mentioned, is at pre-COVID levels. How are you seeing that continue to develop? And perhaps you could put some more color on how you're investing into the channel and how you see that developing over the kind of the mid- to -- or to midterm.

We've actually seen a growth in the e-commerce channel quite significantly. And there's a couple of major -- well, there's a number of benefits. It's a much lower cost of order capture for us. The order size is around 20% greater than through the call center. They buy more brands and they frequently -- buying more frequently. So there's a number of positive facts about that. It would appear that more and more customers want to operate in that way and so we'll continue to offer that as a facility and make sure that we learn from that as we operate Tennent's and Bulmers Direct as well. So we see it as a main part of that moving forward. The other thing that we did reference was guest checkout. So this is where we're allowing customers who currently don't have account with us to immediately open up accounts and order up to 1,400 pounds of product. And we saw something like, I think, about 600 new customers come across on that facility, and we've got 100 that are still being progressed. So it would appear to have quite good traction where people are being let down by the customers -- by the suppliers, sorry, they can tap into the Matthew Clark network and get access to our core brands very quickly.

And perhaps just a couple of follow-ups on that one. Could you just give us an idea of sort of Matthew Clark and Bibendum business, roughly what was the level of e-commerce last year perhaps in a more normalized year? And those new account wins, I think you mentioned them in July and August. Have you got any sense of where they are coming from? Is it more regional accounts that you do winning from competitors? Or is this more national accounts that you're winning from larger competitors?

Patty, have you got any sort of slide on that?

Yes, yes. I mean, look, last year for Matthew Clark and Bibendum, total on-trade ordering was about 51% of total revenue. And the majority of that was, these electronic direct ordering piece. That was about 40%. So kind of pure online, if you like, excluding EDI. Last year, it was about 11% of our total. As of last month, I think that was up to 18%. So it's quite a dramatic improvement in absolute terms. And look, where are we winning the business from? Where are we picking it up? It's a combination of -- combination across the board. As Matthew Clark, I suppose, is representative of the entire sector, we're picking up business from every corner of it in truth. I think we're seen very much as the safe haven, the guys that have the best service levels in the industry. We won't let you down. We never fully shut down our network. Even in the depths of April, we remained operational and we serviced the demand that was there in our customers' darkest hours. So I think we're getting some credit from that. It's very early days. It's hard to necessarily see it in the macro trends or the larger headline trends. But we do believe we're picking up business across the board on the back of our service levels and on our reputation. I'm not letting anybody down. You mentioned that national business, so it's not necessarily linked to online ordering by any stretch, but we have recently signed a deal, an extension of a deal with Stonegate. As you know, they took over Enterprise Inns and we'll be servicing about 450 sites of theirs in the future. They're predominantly the craft union sites. So again, we're picking up national business as well and strengthening those relationships. So it's a little bit of everything, Ewan.

And then my final question, I promise. Just the price/mix decline in Matthew Clark, is there any category mix color that you could give on there? I'm just trying to get a sense of what type. Are we seeing some down trading there? Or are we perhaps seeing retrenchment to perhaps lower priced categories, whether that's from spirits into beer, et cetera? Just a flavor of some of that would be very helpful.

Yes. Will I take this one, Stewart?

Yes, please.

Yes, yes. Look, I think some of those more soft brands are actually hard to take out because I don't think it's -- trading is not performing the way it normally is. So what I might have identified as a trend 1 month doesn't appear to be a trend in the next. What I can say in an overall sense is to help out to eat out schemes and the U.K. did benefit soft drinks. So clearly, people are going out with the families and they were having their dinners and the meals out. Typically, that wasn't great for alcohol sales. We did sell a higher proportion of soft drinks and that would dilute the margin down, if that's what you're picking up.

The next question comes in from Alicia Forry of Investec.

My questions are 2 on profits and 1 on cash. Of the roughly 25% of outlets that remain closed at the end of August, should we conclude that they are unlikely to reopen at all? And are you able to offset a shift of this magnitude over the next couple of years with the cost reductions that you mentioned today? And tangential to this, I sense that C&C was a pretty lean business to begin with. So is there much you can do here? Secondly, also on profits, you were profitable in August and September. Can you comment on October thus far? And finally. On cash, the cash burn seemed to accelerate a little bit in the last 6 weeks. Was there any particular reason for that? I suspect it may have to do with the repayments of that excise that you mentioned happened in September and October. But any additional color on recent drags on cash would be helpful.

Patty, if I take the industry piece first, maybe you want to pick up on the profit and cash. I think in terms of number of closures, it's difficult to say whether those -- the ones that actually remain closed will remain closed or open up again. A lot of the issues for the hospitality industry, a combination of the, first of all, the social distancing, which for small pubs makes it very difficult. Then when they brought in sort of table service and the 10 p.m. curfew, it just means they can't get the footfall through of the sales to actually deliver any real significant profitability. So I think for some of them, there may be opportunities in the future to reopen once we get back to a degree of normality. But what we will be seeing is, as you're right, is a significant change in the shape and size of the on-trade. We believe that we're very well positioned in terms of brand-led distributor model. But we'll be better placed than most to capitalize on that. And we don't see -- we will see -- we would expect some competition to fall away over this period of time for us to take a much bigger share of the smaller cake, and that's what we've always aimed to be, is to get through this in good shape and be ready very quickly when the on-trade does open up again, just to be able to fully capitalize on it. Patty?

Yes, yes. And to build on that, Alicia, I mean, what we know about September, the distribution points improved even further. So it was up in the mid 80% -- or sorry, yes, mid-80% year-on-year distribution points, so just reinforces Stewart's point. I think, look, on cost, first, yes, we absolutely are a lean business and have been a lean business. That's not to say there aren't opportunities for us. And I think the last time we spoke, we might have identified a couple on the logistics side. I think Stewart has mentioned one, but logistics is currently outsourced, for example. There's efficiencies there. There's still a little bit of overlap in Scotland in terms of our logistics footprint. So I think there are opportunities. And clearly, we're very clear that we need to go after them and rightsize our cost base as required. In terms of October, well, we're not finished October, and it's been -- it started very strongly and it's clearly quite volatile. I think all I could say with certainty is we won't -- it will be loss making. I think it will be the month that the profit recovery stops or at least stalls. So that's all I can really say. I can't really put a number on it, if that's okay. And then in terms of cash burn, over the last 6 weeks, yes, you're absolutely right. The difference has been the EUR 39 million tax payments across September and October [indiscernible] see into Irish revenue. If you strip that out, this underlying cash inflow, as you would expect, with us being profitable from July, August and into September.

And back to the speakers, if I may. Perhaps there are some final words from our presenters before we conclude the call.

Okay. Well, ladies and gentlemen, thank you very much for joining our call this morning. We appreciate your interest in the C&C Group. Whilst it was a challenging first half, we're pleased with the outcome and the circumstances, and particularly for the hard work and dedication of all our people. While uncertainty remains about the pace of exit from lockouts, we are confident we have financial strength and business model to navigate the current market environment. I'd also like to recognize and thank both the Board and the management team of C&C who supported me in my role as interim exec chair since January. When David Forde joins a week on Monday, I will revert to my position of non-Executive Chairman. While the 6 months have not been easy time for C&C or any business in the hospitality sector, it's been a positive experience for me to work in a closer way with so many good people within the C&C Group. I'd like to record my sincere appreciation for their support and hard work. David is very fortunate to be inheriting a great team as we look for the challenge ahead. Thank you once again, and thank you for your time today.

Ladies and gentlemen, this now concludes our conference call. Thank you all very much for attending. You may now disconnect your lines.