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Wed 13th May 2015 - Results: C&C Group, SABMiller, SSP
C&C Group reports 10.3% net revenue growth: C&C Group, the branded cider, beer, wine and soft drinks producer, has reported net revenue growth of 10.3% to €683.9m for the year ended 28 February 2015. Operating profit of €115 million declined 9.2% but in line with stated guidance. It reported solid performance in the core segments of Ireland and Scotland with operating profit growth of 1.5% and 1.8% respectively. Stephen Glancey, C&C Group chief executive, said: “Our core businesses in Ireland and Scotland, which represent 86% of operating profit, delivered modest earnings growth during the year. During the course of FY2015, we continued to make progress towards our objective of building leading brand-led distribution businesses in both of these regions. This model reinforces the sustainability of our earnings and cash generation capability which, in turn, drives our ability to create and sustain value for shareholders. Our integration with Gleeson in Ireland has now completed and we are making solid progress with Wallaces Express. In addition, we continue to invest behind our iconic Bulmers and Tennent’s brands. Outside of our core segments, we have been restructuring and investing behind our market positions and brands to drive performance. During the year, we have consolidated our C&C Brands business; accelerated our product investment and development in the US; and, made exciting progress in new international markets. Reflecting both the strength of our balance sheet and our free cash flow characteristics, we completed a €30 million share buyback in FY2015. Today, we announce an increased final dividend consistent with our commitment to provide certainty of value in the form of a progressive dividend stream. The medium term target is to increase the Group’s payout ratio to closer to 50% of earnings. In parallel, our objective is to continue to invest in the business to build durable value. We will continue to evaluate the available range of capital allocation opportunities to drive improved returns. Absent any significant capital allocation decisions, and to improve capital efficiency, we expect to move to a higher leverage multiple by the end of our FY2018 fiscal year with a target of approximately two times net debt to Ebitda within this time frame. Operationally, FY2016 is a period of stabilisation and investment. We have made a decent start in the early part of the year.”

SABMiller reports strong topline growth: SABMiller has reported net producer revenue growth of 5% to $26.288bn in the year to 31 March. Constant currency Ebitda was up 6% to $6.36bn. Group net producer revenue in the United Kingdom grew by 4% on a constant currency basis driven by the double digit volume growth of Peroni Nastro Azzurro through increased rate of sale and distribution in key outlets and assisted by good summer weather, offset by a volume decline in the Polish portfolio. Alan Clark, chief executive, said: “We achieved positive momentum in our underlying business performance, particularly in the latter part of the year, with Ebita growth and margins expanding on an organic, constant currency basis. As flagged, the strengthening dollar against many of our operating currencies had a negative translational impact on reported results. We have a clear strategy to drive topline growth, improve efficiency and shape our mix of business to continue to deliver superior returns to shareholders. Today’s results demonstrate good progress against this strategy. This success is founded on our broad exposure to high-growth developing markets where we have long standing commercial and operational experience, including deep local consumer insights. We have also seen good performance from many of our markets in improving their premium mix and driving innovation. Topline revenue growth was strong in the face of industry headwinds which kept lager volumes in line with last year. Revenue growth was helped by positive results from our strategy to increase premium beer sales in markets like the USA and Australia and in developing markets across Africa and in Colombia. NPR growth in premium brands was 8% (in constant currency) with global brands1 NPR growth of 16%, supported by volume growth of 11%. At the other end of the price ladder, we increased the availability of affordable beers, taking share from the informal alcohol market in Africa and Latin America. By consolidating activities such as procurement and back office services, and integrating our supply chain, we are reaping rewards. The cost and efficiency programme has delivered cost savings of US$221 million in the year, and we are on track to deliver our targeted savings of US$500 million per annum by 2018. Within this, our global procurement organisation helped to drive savings in direct materials, which, together with lower commodity prices, mitigated adverse transactional currency headwinds.”

Douglas Jack – we expect strong First Half results at SSP: Numis Securities leisure analyst Douglas Jack, issuing an ‘Add’ note with a 350p price target, has forecast strong H1 results at transport hub foodservice specialist SSP. He said: “For the interim results, due on 21 May, we forecast PBT being up 40% to £15.6m, driven by our forecast of a 55bps increase in margins. The company is positioned to benefit from growth in passenger volumes in air (by 4% pa) and rail (by 1-2% pa), but, in our view, this potential is dwarfed by the company’s opportunity to grow margins. LFL sales rose 2.7% in Q1, driven by the UK, North America, the Middle East and Asia Pacific, whereas parts of continental Europe remained challenging, particularly France and Germany, which were affected by strike action. We forecast 2.9% LFL sales growth in Q2 (aided by less strike action) and 3.0% over the full year: airport revenues are growing more strongly than rail (held back by re-development work); and airports’ share of revenues is greater in H2 than H1. We expect to hold our full year forecasts, which already reflect Sterling strength taking 3.5% off sales growth. We believe margins offer the greatest potential source of upgrades, given that it should be capable of 45bps annual Ebit margin growth, based on 3% LFL sales. In our view, SSP’s valuation is justified by annual expectations of c.0.4x net debt/Ebitda reduction and 15% earnings growth in 2015E, based on conservative assumptions.”

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