- Ongoing tech issues to trigger €25 million profits hit
- CEO steps down with immediate effect
- Post-pandemic profit recovery proving challenging
Shares in C&C (CCR) sank 17.5% to 127.1p after the Dublin-headquartered drinks company warned it will incur a €25 million one-off hit to profitability for the year to February 2024 related to disruption from a botched software upgrade, which has led to the resignation of CEO David Forde.
The news leaves an especially sour taste since as recently as March, the maker of Magners and Bulmers ciders had insisted service levels had largely returned to normal as it flagged an imminent return to the dividend list.
€25 MILLION PROFIT IMPACT
On 23 March, C&C highlighted ‘significant’ challenges in the implementation of its complex Enterprise Resource Planning (ERP) upgrade across the Matthew Clark and Bibendum businesses.
And today, the company warned this process has ‘taken longer and been significantly more challenging and disruptive than originally envisaged, with a consequent material impact on service and profitability’ within this part of the business.
The premium drinks play behind beer brand Tennent’s expects a one-off impact of roughly €25 million associated with ERP system disruption in full year 2024, ‘reflecting the cost associated with restoring service levels and lost revenue’.
Excluding the impact on Matthew Clark and Bibendum however, C&C is performing in line with management expectations for 2024 and the board is ‘confident’ in the drinks group’s long-run strategy and prospects.
The FTSE 250 beverages company, which has been impacted by the cost-of-living crisis and recent rail strikes, is sticking with previous year-to-February-2023 guidance for operating profits of €84 million, €2 million below Shore Capital’s estimate it must be said.
C&C also reassured investors that its strong free cash flow generation and increased balance sheet strength will enable it to reinstate the dividend for full year 2023 as planned.
FORDE DRINKS UP AND DEPARTS
CEO David Forde, who navigated C&C through the pandemic, has carried the can for the technology project debacle and stepped down.
But he will be available to help ensure a smooth handover to numbers man Patrick McMahon, who has hopped into the CEO hot seat ‘with immediate effect’.
C&C’s chairman Ralph Findlay has been appointed executive chair to support the transition, since McMahon will still be overseeing the financials until a new finance director is appointed.
The board ‘recognises and thanks David for his contribution to the group throughout a challenging period for our industry’, commented Findlay.
‘As part of our ongoing succession planning we keep internal and external candidates for all key positions under review and we are pleased to have someone with Paddy McMahon’s skillset and knowledge of the business to step into that role.’
THE SHORE CAPITAL VIEW
Shore Capital believes that there is ‘a lot to take in with today’s announcement, not only the continued ERP issues and the CEO departure, but also the difficulties the group has faced over the last year, with profit recovery proving more challenging than anticipated at the start of the year.’
The broker has placed its ‘buy’ recommendation under review while it awaits ‘greater clarity on systems issues and underlying trading development, with the full year results due next Wednesday.’
LEARN MORE ABOUT C&C
