Magners tipped for 8% growth

IRISH drinks group, C&C is being tipped to boost volume growth of its Magners cider brand by 8% in Britain in its current financial year, with one investment bank increasing its share price target for the group.

In a detailed research report on the Dublin and Clonmel-based group, JP Morgan Cazenove said it was upgrading the C&C stock from ‘neutral’ to ‘overweight’ and was upping its share price target, for the group’s current fiscal year, from €3.50 to €4.

C&C’s share price was up by 6c — or just over 1.6% — at €3.60 yesterday.

The company& recently reported a strong set of 2010/11 results, for the full-year to the end of February, showing a 17% rise in operating profit (to €105m), a 12% increase in earnings per share (to 25.4c) and a reduction in net debt from €365m to €6m.

Its overall cider volumes were up by 1.7% in the year, with a fall in Ireland offset by a decent rise for Magners in Britain. The group’s organic earnings before interest and tax (EBIT) grew by over 8% and JP Morgan feels this trend can be maintained throughout the & current financial year.

“We expect some slight absolute profit decline in Ireland, but with volume growth in Britain driving positive operational gearing and the continued growth of the export business, this should allow around 9% organic EBIT growth even with uplifted marketing investment,” Cazenove said in its note.

“Whilst we wouldn’t get carried away with the opportunity for ‘international’ cider and Magners brand exports, we do think robust double-digit volume growth — even after marketing investment — will drive an increasing, though still small, absolute profit contribution,” it added.

Cazenove has also upgraded its earnings per share forecasts & by 3%, 4% and 6%, respectively, for the group’s next three financial years.

As well as anticipating good volume growth in a strengthening British cider market, this year, the broker also sees group-wide growth coming from C&C’s beer category.

“We expect C&C to deliver on the remainder of the €10m of expected synergies, primarily from Tennents in its current year. We think the most remarkable feature of the progress made in the last year was in the rise in the underlying margins at Tennents,” yesterday’s commentary added.