C&C confident in recovering from ERP system difficulties

C&C Group said in a trading update on Tuesday that it expected its first-half operating profit to fall between €29m to €31m.

The FTSE 250 drinks maker said it anticipated net revenue of €870m for the six months ended 31 August, marking a decrease of around 1% compared to last year.

That expected operating profit encompassed most of the singular profit impacts from the disruption caused by implementing its new enterprise resource planning (ERP) system in the Great Britain distribution division - a matter that C&C had disclosed in May.

Nevertheless, C&C announced that considerable strides had been made in rectifying the ERP system's implementation issues.

Its ‘On Time in Full’ (OTIF) delivery metrics were now back to their levels before the ERP system was implemented.

While the company experienced encouraging sales from its brands in Ireland and Scotland, with a 6% increase in net sales revenue for its branded business during the period, it did face some challenges.

The first half of trading began strongly, buoyed by favourable weather in June.

However, the later months experienced setbacks due to inclement weather in July and August and the economic pressures related to the cost of living, especially in Britain.

On the financial front, C&C's leverage at the close of the first half was predicted to be 2.1x post-IFRS 16 and 1.6x pre-IFRS 16.

Although that leverage would be slightly higher than its target, mainly attributed to the ERP system challenges, C&C said it was confident in bringing it within its aimed range of 1.5x to 2x by the end of the financial year in February.

In addition to resuming dividend payouts earlier in the year, C&C's board said it was also considering other avenues for capital returns.

Finally, C&C said it was recruiting a new group chief financial officer, partnering with an independent executive search agency.

Updates regarding the recruitment will be made in the coming days.

“Set against a difficult market backdrop, we are pleased with the strength of the performance of our branded businesses in Ireland and Scotland in the period,” said group chief executive officer Patrick McMahon.

“We are particularly pleased with the progress we have made in restoring customer service levels following the ERP system implementation issues in our GB distribution business within our planned time frame.

“Delivering outstanding service, winning back customers, continued business simplification, and improved operating efficiency remain our top priorities and focus for the second half.”

C&C said it would announce its first-half results on 26 October.

At 0910 BST, shares in C&C Group were up 3.79% at 137p.

Reporting by Josh White for Sharecast.com.