Annual Report 2014

Operations REVIEW

TENNENT’S UK

Tennent’s UK

Constant Currency(i)

FY2014

FY2013

Change

€m

€m

%

Revenue

216.2

220.5

(2.0%)

Net revenue

103.6

104.7

(1.1%)

- Price /mix impact

0.5%

- Volume impact

(1.6%)

Operating profit

34.6

29.1

18.9%

Operating margin (Net revenue)

33.4%

27.8%

Volume – (kHL)

1,273

1,294

(1.6%)

Tennent’s UK

Tennent’s operating profits increased by 18.9% to €34.6m. Operating margins improved by 5.6ppt to 33.4% reflecting improved channel mix, successful new product launches and cost reduction. On-trade volume grew 3.1% year on year, representing good share gain in a channel of trade that was down 7.0%(ii) in Scotland. For the third consecutive year, Tennent’s pricing to the independent free trade was held flat. Overall total volumes declined by 1.6%.

We are pleased with the progress of Caledonia Best which has captured 9.6%(ii) of the on-trade draught ale category since its launch. Equally, Heverlee, our authentic hand-crafted premium Belgian lager, is selling well in Scotland and Northern Ireland. We continue to invest in trade lending with £9.5 million advanced during the year, taking our trade loan book in Scotland to £31.0 million. Looking to the longer term, the acquisition of Wallaces Express reinforces our customer-centric, multi-beverage model and the investment in a craft brewery in Glasgow via a joint venture with Williams Bros will facilitate participation in the craft arena.

Tennent’s Lager is the top selling lager in the on-trade in Northern Ireland. Volumes declined 6.4% in the year.

C&C has continued to demonstrate its commitment to Northern Ireland by relocating meaningful skilled resource to Belfast and continuing to invest behind the on-trade. This has helped to secure a handful of flagship accounts, the benefit of which should flow through in years to come.

Heverlee was also launched in Northern Irish pubs and appears to have been well received by publicans and consumers alike.

For note references to the Operations Review please see page 29.