- Branded drinks maker is back in the black
- Strengthened balance sheet paves way for dividend reinstatement
- Further price hikes likely to mitigate cost inflation
Shares in C&C (CCR) fizzed 6.8% higher to 219p after the premium drinks company reported a return to profit for the year ended 28 February 2022 thanks to the return of the on-trade, and served up news of a robust start to the new financial year.
The maker of cider brands Magners, Bulmers and Orchard Pig as well as beer brand Tennent’s and Tipperary Pure Irish Water also highlighted a welcome reduction in net debt, though management also warned building cost pressures will ‘likely necessitate further price increases’.
BACK IN THE BLACK
Dublin-headquartered C&C, which also owns Matthew Clark Bibendum, the UK’s largest independent drink distributor to the on-trade, has been boosted by the lifting of Covid restrictions and the reopening of the UK and Ireland hospitality industries.
The FTSE 250 beverages business swung from operating losses of €63.6 million to operating profits of €47.9 million last year, as sales rebounded 88% to almost €1.44 billion.
C&C served up pre-tax profits of €34.4 million, a plate-pleasing €5 million ahead of Shore Capital’s estimates.
During the year, resilient operator C&C managed soaring inflation through the combination of its €18 million cost reduction plan, input cost hedging and a November 2021 price increase.
STRONG START
In today’s statement, C&C added that the current financial year has started strongly with the lifting of on-trade restrictions, the easing of the pressures on supply chains and additional public holidays having created ‘a more positive trading environment over recent months’.
The company also reported a reassuring year-on-year reduction in net debt from €442 million to €271 million following the return to trading and a rights issue, and management said this strengthening of the balance sheet paves the way for the reinstatement of dividends ‘in due course’.
CEO David Forde said 2022 ‘finished with a robust return of the on-trade, and we are excited for the opportunities ahead.
‘Looking forward, we are operating in an evolving and challenging inflationary cost environment and will continue to monitor this closely over FY2023 and beyond. We have already taken action to afford the business a degree of protection, nevertheless we are susceptible to further increases in our cost base which would necessitate further price increases.’
Forde continued: ‘Despite the current positive sentiment in the hospitality sector post reopening, we are mindful of the pressures being faced by consumers and its potential impact on future demand.’
THE SHORE CAPITAL VIEW
‘Overall, we see this as an encouraging update from C&C,’ said Shore Capital. ‘We see current trading more robust than built into forecasts, although we retain our full year operating profit estimate for FY23F of circa €100 million, noting broader macro uncertainty and building cost pressures.’
The broker is ‘encouraged by the recovery in the on-trade and building market share’ and sees the potential for C&C ‘to exploit its distribution-led model to broaden its brand exposure.’
