Cider, beer, wine and soft drinks company C&C (CCR) returned to profit generation in July through to September, encouraging news that nudged the shares up 0.5% to 178p on Wednesday.

However, the Irish brewer behind brands such as Tennent’s, Bulmers and Magners, as well as drinks distributor Matthew Clark, warned the near term outlook for the on-trade sector ‘remains challenging and uncertain’, with the key Christmas trading period likely to be impacted by continuing Covid-19 restrictions across the hospitality industry.

The six months ended 31 August 2020 was dominated by Covid-19, encompassing three and half months of the UK lockdown as well as the lockdown in Ireland and subsequent restrictions thereafter.

Unsurprisingly, C&C swung from a €64.4 million operating profit to a €11.7 million operating loss on a 55% slump in sales to €386.7 million during this monumentally tough period.

PROFITS RETURN

C&C said its business had returned to profit alongside the reopening of the on-trade in July, but the Dublin-headquartered company also warned the outlook for the on-trade sector remained challenging with limited near-term visibility.

‘September continued the return to profitability for the group, however October is challenged by further on-trade restrictions in both the UK and Ireland,’ said the company, which also has a stake in the Admiral Taverns pub group.

Stewart Gilliland, Interim Executive Chairman, explained: ‘Although we expect the pace of recovery will continue to vary, as the largest independent alcohol distributor across the UK and Ireland, our business is structurally integral to the markets we serve.

‘Our near-term focus is securing our position and enhancing the performance of the business, while positioning C&C to deliver for customers and shareholders over the long term.’

THE SHORE CAPITAL VIEW

Shore Capital believes C&C has ‘done well to limit the impact on profitability and the increase in debt’, though the broker warns ‘the coming weeks and months are likely to be challenging given the backdrop.

‘C&C is a unique way of playing the post-lockdown UK on-trade market, although the near-term outlook is much more uncertain, especially given its exposure to both Ireland and Scotland, where restrictions remain more draconian.’

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Issue Date: 21 Oct 2020