C&C share price falls 10% on profit warning

Irish drinks group, C&C saw its share price slump by nearly 10% yesterday on the back of it warning that its annual profits are likely to be down by around €10m this year.

In a largely bleak third-quarter trading period —covering the three months to the end of November — the Dublin-based owner of the twin cider brands Bulmers and Magners and Tennent’s lager said recent trading was below expectation and operating profit for the 12 months to the end of February is now likely to be in the region of €115m.

The group posted an operating profit of just under €127m last year.

The jewel in C&C’s crown has been its core Irish and Scottish operations. While sales volume in both countries fell (3.4% in Ireland and 2.4% in Scotland) during the third quarter, management expects each to continue to provide “resilient levels of profitability and cash flow” going forward.

Pressure on the group has largely come from its operations in England and Wales and its underperforming interests in the US.

Third-quarter performance in the latter territory saw sales volume decline, year-on-year by 16.2%, which was still a marked improvement on the 21% first-half fall.

But, in England and Wales third-quarter volume was down by nearly 10%, with net revenue down almost 17% compared to the same period last year.

Just over two months ago, when publishing its first-half results, C&C’s management suggested that if they failed in their bid to buy Britain’s Spirit Pub Company — which ultimately, proved the case — they would look at other ways to grow in England and Wales and could even downsize operations there and reposition itself as a niche premium player.

In yesterday’s update, the group said it “continues to explore” a range of initiatives in order to improve profitability in those regions.

“Full-year 2015 marks a difficult trading period for C&C; in particular, the markets beyond Scotland and Ireland. Our new forecast mix implies that Ireland and Scotland will now account for around 90% of group earnings in full-year 2015.

“The two divisions combined are forecast to grow EBIT by 9% to €103m in the current year, while the remaining three divisions are forecast to deliver a modest contribution of around €12m, down 63% year-on-year,” said Davy Stockbrokers’ Cathal Kenny in a note.

C&C also yesterday announced plans for a capital return to investors by way of a share buyback programme, which was welcomed.

“The company has authorisation to buy back up to 10% of the outstanding share capital. The buyback will not compromise balance sheet strength and flexibility. At the current valuation...allocating financial resources towards a share buyback is a sensible use of capital,” added Mr Kenny.

C&C’s share price closed down 9.33%, at €3.40, yesterday.


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