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The year 2007 is one that C&C - owner of the Magners cider brand - would rather forget. Last year, the group was forced to issue three profits warnings, as sales of this highly seasonal product were hit by the wet weather in the UK and Ireland. And stiff competition from rival Scottish & Newcastle - which led a heavy price war to gain market share - did not help.
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To make matters worse, while revenues were falling, costs were on the rise as C&C increased marketing expenditure and invested €97m (£77m) in production capacity. This led to a sharp reduction in pre-tax profit. An exceptional gain of €137m on the disposal of its soft drink business to - combined with a lower tax charge and active share buyback programme - helped to soften the impact.
During the autumn, the group reorganised its defences, reducing its headcount to align its cost structure with sales volumes. However, the group has hired a former Molson Coors' executive who helped to strike a distribution deal for a draught version of Magners, which will be launched this summer.
Broker Citigroup forecasts adjusted EPS of 35.4¢ for 2009, rising to 36.2¢ in 2010.
C&C (CCR) |
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|---|---|---|---|---|
| ORD PRICE: | 465¢ | MARKET VALUE: | €1,477m | |
| TOUCH: | 464-466¢ | 12-MONTH HIGH: | 1,264¢ | LOW: 375¢ |
| DIVIDEND YIELD: | 5.8% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 134¢* | NET DEBT: | 61% | |
| Year to 28 Feb | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2004 | 775 | 126 | 36.0 | nil |
| 2005 | 750 | 82 | 23.6 | 13.0 |
| 2006 | 769 | 104 | 29.6 | 15.0 |
| 2007 | 739 | 177 | 47.8** | 27.0 |
| 2008 | 679 | 104 | 28.9** | 27.0 |
| % change | -8 | -41 | -40 | - |
Ex-div:21 May Payment:16 Jul *Includes intangible assets of €394.7m, or 126¢ a share **Continuing operations |
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The share price has fallen by 25 per cent since our sell tip (€6.21, 1 Aug 2007) and now trades on a far more reasonable forward PE ratio of 13 times. Fairly priced.
Last IC View: Sell, €5.57, 11 Oct 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
