Tennent's brewer C&C Group is taking a 'series of proactive steps' to mitigate the impact of the COVID-19 pandemic on its operations, including a cost reduction programme that is set to deliver savings of €18 million per year.
The group outlined its cost savings strategy in a period end trading update for the 12 months to 28 February.
It said that it plans to accelerate the optimisation of its English and Scottish delivery networks by the first quarter of next year, which will consolidate volumes from three separate networks into two, while it has also postponed non-committed capital expenditure projects.
Elsewhere, the group is renegotiating the timing of a term loan repayments and implementing a number of working capital initiatives, including the negotiation of temporary extensions to supplier payments terms and agreeing temporary deferrals with the UK and Irish tax authorities.
It is pausing the payment of dividends, and has not issued guidance since the summer of 2020.
Commenting on the announcement, Cathal Kenny of Davy said, "Decisive action by management will enable C&C to quickly rebuild profitability and drive market share gains and platform relevancy in a post-lockdown environment. C&C’s engagement with trade customers infers significant pent-up consumer demand."
In the statement, it also announced that it has sold its wholly-owned US subsidiary, Vermont Hard Cider Company, to Northeast Kingdom Drink Group LLC for $20 million, which will be used to drive down debt.
This follows on from the sale of Tipperary Coolers in Ireland for €7 million during the most recent financial year.
'Going forward, the objective is to continue to position C&C as the preeminent brand-led drinks distribution business in the core markets of the UK and Ireland,' the group said.
'Strong Business Model'
“C&C has an inherently strong business model, with admired brands that embody provenance and have a real affinity with their markets, coupled with a leading distribution infrastructure in terms of scale and reach," said David Forde, C&C Group chief executive.
"These are supported by the quality of our people who are dedicated, agile and passionate about our brands. While our ability to trade has been severely restricted in hospitality, our brands have performed strongly in the off-trade. The Group has been working hard to ensure that we are primed and ready to serve our on-trade customers as and when the hospitality sector is allowed to reopen, from a more streamlined base and with new brand partners, in the post pandemic market.”
The group said that it is looking forward to the coming financial year with 'increased optimism', with the pandemic vaccination programme expected to see an easing of on-trade restrictions in time.
'The strength of the Group’s business model together with reduced operating costs will support a stronger return to trading cash flows and profitability as and when restrictions ease and the hospitality industry reopens,' it said.
C&C Group will report its full-year preliminary results on 26 May.
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