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Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Welcome to the C&C group trading update conference call. Today's call is being hosted by C&C's CEO, Mr. Maurice Pratt, and Mr. Brendan Dwan, CFO. For your information, this conference is being recorded.
I will now pass the call over to Mr. Dwan for opening remarks. Please go ahead, sir.
BRENDAN DWAN, CFO, C&C GROUP: Ladies and gentlemen, good morning and good afternoon and welcome to C&C's full-year preclosed conference call. Before we review 2007, 2008 performance, I'd like to preface the call with the Safe Harbor disclosure. During this call, our remarks may include forward-looking statements including statements concerning expectations about future financial performance and market conditions. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated.
I will now hand you over to Maurice Pratt, Chief Executive, who will outline our trading for the 12 months just ending and the outlook for 2008, 2009. Following that, we will be happy to take your questions.
MAURICE PRATT, CEO, C&C GROUP: Thank you, Brendan, and again good morning and afternoon, ladies and gentlemen. As outlined in our trading statement issued this morning, turnover growth for the 2007, 2008 financial year for continuing operations is expected to decline by approximately 9%. In terms of profitability, our overall operating margin before exceptional items is expected to decline by just under 10 percentage points for the full year to approximately 17.5%. This outcome reflects a decline in the performance of our Cider division year-on-year due to a number of specific factors.
In the Republic of Ireland, Bulmers volume declined at 4% compared to long alcohols drinks markets which is estimated to have declined by between 1% and 2% for the period. Bulmers decline for the full year reflects a particularly weak summer quarter when volumes declined 14% compared to the same quarter in the prior year. Bulmers is an established brand in the Irish market and a decline in volume in this period highlights a significant impact of the sustained bad weather during the summer period. Bulmers showed its resilience by recovering post the summer delivering unchanged volumes year-on-year in the second half.
Magners year-on-year volume declined 15% reflects factors particular to Magners combined with a very weak GB on trade LAD market which declined by 6% over the year to November. In relation to Magners itself, the brand lost marketshare in the Great Britain on trade due to new competitors entering the premium cider market which Magners had created. As a result, our MAT share of the on trade packaged cider market dropped from 78% to 67% in the years November '07.
In addition to competition, the significant and sustained period of poor summer weather had a negative affect. While this applied to the long alcohol drinks market generally, premium cider was disproportionately impacted due to its warm weather association and as the summer's is a critical recruitment period for consumers which sustained volume growth during the autumn and winter quarters.
In the six month to November 30 of 2007, the packaged cider market went from rapid growth to a decline of 7%. A positive aspect to performance was that we had strong uplift in the off trade recording growth of circa 70% in the year which moved our off trade profile up to circa 35%.
Finally, our financial performance was impacted by an increase in operating costs associated with capacity expansion and in marketing costs arising from increased investment in Great Britain and Ireland and expectation of volume growth and in the European test markets.
Turning to our spirits and liqueurs division, we expect shipment (inaudible) depletions volumes to show growth of 5% to 6% arising from continuing double-digit growth for Tullamore Dew. Operating profit is expected to decline, however, due in part to increased marketing investment in Tullamore Dew.
We announced a reorganization cost reduction program on the 15th of November last year which had the objective of strengthening our GB structure realigning cost structures in the current sales volume base and streamlining the organization structure. This will be materially in place by April and C&C is on track to achieve the promised 10 million savings in the full-year net of strong underlying cost inflation. The overall cost of implementation will be within our original estimate of EUR15 million.
Turning now to the outlook for the 2008, 2009 fiscal year. The Group's strategy is to drive growth in the premium cider category to a higher level of consumer advertising in both Great Britain and Ireland and to stabilize our market performance in 2008, 2009 through implementing a range of measures focused on the GB market. This together with the cost reduction initiative which we believe will lead to a recovery in our financial performance in the year.
Among the initiatives planned is the launch in Great Britain of other draft Magners in May 2008 and in this regard, C&C has entered into an agreement with Coors Brewers for its kegging and distribution. In addition to this, the new managing director from Magners Great Britain, John Holberry, will be joining C&C on the 18th of March next.
In terms of new market opportunities for Magners, we will continue our market tests for the brand in Barcelona and Munich during 2008, 2009 and to evolve and enhance our test strategy based on results to date and market feedback. We plan to fund the revised test strategy at substantially reduced net costs compared to the EUR10 million incurred in the 2007, 2008 year.
We continue to see solid volume and revenue growth from spirits and liqueurs. We expect to deliver growth in this division in 2008, 2009 notwithstanding the negative impact of the U.S. dollar to euro exchange rate. Whether there is imminent visibility at this early stage, the Group on the basis of normal summer weather in 2008 expects to show modest revenue growth in '08, '09 and some improvement in margins. This assessment allows for …