C&C swings to a loss amid hospitality lockdown

It will come as little surprise that drinks maker C&C (CCR) has been squeezed by Covid-19 and the disruption to the hospitality industry. With the collapse in demand from the ‘on-trade’ channel – pubs, bars and restaurants – net revenue (which accounts for excise duties) more than halved in the six months to 31 August, to €387m (£349m).

The steep drop in sales meant that C&C swung to a €12m adjusted operating loss in the first half of the year – versus a €64m profit a year earlier – although it said that it turned a profit in July and August thanks to the gradual reopening of on-trade outlets post-lockdown. At the end of August, the group was trading with 78 per cent of outlets it had done business with a year earlier in Great Britain, compared to 47 per cent in Ireland.

Over in the off-trade segment, which sells to supermarkets and independent retailers, the shift to home consumption saw volumes in Ireland surge by almost half year-on-year. The group’s Tennent’s, Bulmers and Magners brands all increased their market share by volume.

Net debt has ticked up by 14 per cent from the February year-end position to €372m. This reflects a €36m working capital outflow as C&C pulled in less cash from its ‘receivables purchase programme’ – this entails selling its trade receivables to banks who then recoup the money owed by customers.  

C&C remained profitable in September but said that October has been “challenged” by additional on-trade restrictions. The group has warned that its crucial Christmas trading period will likely be hit as well. House broker Numis anticipates an adjusted operating loss of €6m for the year to 28 February 2021, rebounding to a €86m profit in 2022. The outlook is highly uncertain and the recovery will likely be slow, but the group is sitting on €387m of liquidity, which should help it weather the storm. Hold.

Last IC View: Hold, 205p, 05 Jun 2020