C&C Group Regulatory News (CCR)

Prior Year Accounting Adjustments and Directorate Changes

This announcement contains inside information.

Dublin, London 7 June 2024: C&C Group plc ('C&C' or the 'Group') announces that, as reflected in the financial update RNS released this morning, prior year accounting adjustments are expected to be made in respect of inventory and balance sheet items. There is no change to the Group's expected earnings for FY24-FY27, however they do impact previously reported financial statements as summarised below.

Prior Year Accounting Adjustments

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These adjustments in aggregate represent an underlying operating profit adjustments charge of €5m. By year, the restatements comprised a €1m adjustment charge in FY2023, a €3m adjustment credit in FY2022 and a €7m adjustment charge in FY2021. In addition, the Group is expecting to record an exceptional prior year (FY2023) charge with respect to onerous apple contracts of €12m which was initially expected to be recorded in FY2024. The total value of the adjustments (underlying plus exceptional) is €17m. There will clearly also be an impact on the unaudited FY2024 Interim Results, details of which will be set out in the FY2025 Interim Results in October.

These adjustments relate principally to five items, inventory related matters at Clonmel (€10m charge), goods received not invoiced ("GRNI") (€3m credit), the timing of release of customer discount liabilities (€3m credit), change in accounting treatment of glassware (€1m charge) together with additional items (net €nil) over the three-year period in question. These adjustments are set out in more detail in the Summary of FY2024 Financial Performance (Unaudited) update announcement released separately this morning. Neither that announcement, nor the financial information set out in this announcement, is, nor is it intended to be, a preliminary statement of annual results given they each contain unaudited financial information which has not been agreed with the auditors as would be required for a preliminary statement of annual results.

The adjustments have been made following detailed internal and external reviews of inventory and balance sheet reconciliations after discrepancies were notified to the Audit Committee earlier this year. An independent accounting firm was appointed to investigate the relevant issues and to determine any potential financial impact and the time period over which the issues extended. The issues that were identified were then considered in detail by both the Group's Audit Committee (the 'Committee') and the Board, as part of the finalisation of the Group's FY2024 Annual Report and Accounts.

The Board and Audit Committee have considered the background to these items in detail, including representations and accuracy of information provided to the external auditors and to the Committee and the Board at the time the items arose and in subsequent financial years. In addition to accounting mistakes and errors of judgement underlying these historic issues, it is clear from the reviews undertaken that there were failures in the Group's reporting framework and that in parts of the organisation behaviours fell short of the levels of transparency demanded and required such that opportunities were missed to identify and appropriately address the relevant issues. Further details relating to the underlying issues and the consequent actions and improvements to the controls and governance frameworks that have been and are being taken to ensure that there is no repetition of these issues will be set out within the Group Audited Annual Report and Accounts which is expected to be issued before the end of June 2024 and the Board will also ensure that the Company complies with all related legal and regulatory requirements.

Directorate Changes

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The Group's Chief Executive Officer, Patrick McMahon, was Chief Financial Officer during the periods to which these adjustments relate and acknowledges that the relevant shortcomings occurred at a time when he had overall responsibility for the Group's finance function. Accordingly, he has informed the Board that he will step down as CEO and as a director with immediate effect. The Board, with regret, has agreed that it would be in the best interests of the Group for Patrick to do so. It has been agreed that he will remain as an employee until the end of September to facilitate a smooth transition. The Group thanks Patrick for his contribution and service over many years.

In addition to his duties as Chair of the Board, Ralph Findlay has been appointed Group CEO with immediate effect to ensure continuity of executive leadership. It is expected that he will remain in post as Group CEO for between 12 and 18 months, subject to the timing of the recruitment of Patrick's long-term successor with the relevant search to commence in the autumn. 

In light of his appointment as Group CEO, Ralph Findlay has stepped down as Chair of the Nomination Committee and the Senior Independent Director, Chris Browne, has been appointed Chair of the Nomination Committee with immediate effect.

Executive Arrangements

All remuneration arrangements for Ralph Findlay are consistent with the terms of the Directors' Remuneration Policy approved by shareholders at the AGM in July 2021 (the 'Policy'). As Group CEO, Ralph Findlay will receive an annual base salary of €702k, a pension allowance of 5% of salary in line with the contribution available for the Group's employees, a benefit allowance of 7.5% of salary and maximum annual bonus opportunity of 125% of salary.

Patrick McMahon's remuneration and severance terms will be in line with his service agreement and the Policy.

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