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US cider dilutes C&C's profits

Trading proved to be worse than expected during the first-half for beer and cider brewer C&C Group
October 29, 2014

While attention in recent days has been focused on C&C's (CCR) bid interest in Spirit Pub Company (SPRT), the brewer's soggy half-year results have certainly stolen the spotlight since - at least for now.

IC TIP: Buy at 336p

The results fell short of expectations as trading continued to decline in both the US and English cider markets, reflecting increased competition and pricing pressure. Group operating profit dipped nearly 3 per cent to €69.2m (£55m), against expectations of a 2 per cent rise. High operational gearing meant a 9 per cent volume slide in England and Wales translated into a 37 per cent fall in operating profit there, to €7.2m. Across the pond, volumes of Woodchuck cider slumped 29 per cent, but profits plummeted 90 per cent here to just €0.7m, as margins collapsed to 3.6 per cent from 26.7 per cent. By contrast, the core Irish and Scottish businesses - which generated 85 per cent of group profit - leapt ahead, reflecting good progress with the integration of the Gleesons and Wallaces wholesale businesses.

There were no details on the offer for Spirit, but management did suggest that such an acquisition might materially enhance the group's commercial interests and help deliver sustainable shareholder returns. Broker Investec Securities expects full-year pre-tax profit of €124m, giving EPS of 31.6¢ (from €116m and 29.5¢ in 2014).

C&C (CCR)
ORD PRICE:336¢MARKET VALUE:€1.2bn
TOUCH:336-337¢12-MONTH HIGH:502¢LOW: 328¢
DIVIDEND YIELD:3.0%PE RATIO:12
NET ASSET VALUE:255¢*NET DEBT:17%

Half-year to 31 AugTurnover (€m)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
201348650.512.54.3
201452860.315.34.5
% change+9+19+22+5

Ex-div: 6 Nov

Payment: 23 Dec

£1=€1.26

*Includes intangible assets of €747m, or 215¢ a share