THE owner of Tennent’s Lager has declared it is making good progress as it strives to recover from a botched IT system upgrade that will cost it around €25 million, sending shares in the company up nearly 6%.

C&C Group also reported that trade had been “encouraging” for its brands, which include Magners Irish cider, in Scotland and Ireland in the first half. Net sales revenue at its branded business was up around 6% for the six months ended August 31, compared with growth of 9% in the four months to the end of June.

However, the benefit it reaped from the good weather early in the first half, particularly in June, was followed by poorer conditions in July and August which, combined with cost of living pressures, led to a slowdown towards the end of the half.

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C&C told the City that it now expects to report net revenue of around €870 million for the six months to August 31, down 1% on the same period last year, with operating profit expected to be in the €29m to €31m range. It booked an operating profit of €54.9m for the first half of last year.

The fall in profits will be largely attributed to a €25m charge booked by the company in May because of difficulties arising from an upgrade to software systems in its wine wholesaling business, which includes the on-trade suppliers Matthew Clark and Bibendum.

C&C reported then that it had encountered “significant challenges, in terms of cost and customer service, in the implementation of a complex enterprise resource planning (ERP) system upgrade in the Matthew Clark and Bibendum (MCB) businesses in Great Britain”.

“The implementation process has taken longer and been significantly more challenging and disruptive than originally envisaged with a consequent material impact on service and profitability within MCB,” it added, stating that it expected a one-off impact of around €25m associated with the system this year.

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On the same day, the firm announced that it had parted company with chief executive David Forde, “having navigated C&C through the challenges of the Covid-19 pandemic”. He was replaced Patrick McMahon, formerly group financial officer. The process to recruit a new finance chief is ongoing, C&C said yesterday.

The company noted that its leverage in the first half would be higher than its target range because of the problems it ran into around the ERP integration. But it reaffirmed that leverage would be within its stated range at the end of the current financial year in February.

Mr McMahon said yesterday: “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.

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

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The company will announce its results for the first half on October 26.

Greg Johnson, research analyst at Shore Capital, said the update from C&C indicates that, adjusting for the hit from the ERP challenges, “underlying operating is only modestly down year-on-year, which we see as encouraging given the challenging backdrop, especially around input pressures”.

He added: “Recovery of input inflation in the coming periods will [be] key to rebuilding margins going forward.

Shares in C&C closed the day up 5.45%, or 7.2p, at 139.2p.