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C&C delivers against tough comparators

The drinks maker faced tough prior year comparisons as the result of the football World Cup and a particularly hot summer
C&C delivers against tough comparators

These half-year figures from C&C Group (CCR) are set against a tough comparative period, when balmy summer weather combined with an extended showing from England's football team in last year's World Cup. The drinks maker managed to deliver net revenue growth of 13.5 per cent to €875m (£755m), while operating profit was up 9.2 per cent to €63.8m. Chief executive Stephen Glancey assured investors that the group remains on track to deliver double-digit EPS growth by the end of the current financial year, up from the 7.5 per cent growth rate which excludes lease provisions under accounting standard IFRS16. (Shares in C&C now have their primary quote in London rather than Dublin, with the share price now denominated in pence rather than euro cents).

IC TIP: Buy at 372p

The drinks distribution businesses Matthew Clark and Bibendum, both acquired in 2018, are C&C’s biggest source of revenue, with net sales up by more than a fifth to €565m during the first half. Cost cutting and procurement synergies aided a 100 basis point improvement in margins year-on-year to 2.1 per cent. Analysts at Investec note that C&C management still expects the margin to improve to 3 per cent over the long term. Sales, profitability, and cashflow for Matthew Clark and Bibendum tend to be second half weighted for the festive season, so margins are expected to improve in the latter half of the year.

By contrast, sales of C&C’s cider brands normally increase during the warmer summer months. This makes the 9.2 per cent fall in total cider volumes in the UK discouraging, ahead of the 3.5 per cent decline across the UK beer and cider markets in total over the same period, although the relative performance of the Magners cider brand – volumes down 2.9 per cent in the UK – was a little more palatable. The period saw the launch of 'Bulmers 0%', a nod to the increased demand for non-alcoholic beverages, which form a minor, yet growing, segment of the market.

Analysts at Investec expect pre-tax profits of €104m during the year to February 2020 giving EPS of 29.3¢, increasing to €116m and 31.7¢ in FY2021.

C&C GROUP (CCR)   
ORD PRICE:372pMARKET VALUE:£1.16bn
TOUCH:372-378p12-MONTH HIGH:390pLOW: 230p
DIVIDEND YIELD:3.6%PE RATIO:18
NET ASSET VALUE:185¢*NET DEBT:82%**
Half-year to 31 AugTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (¢)
20180.9852.814.65.33
20191.0953.615.55.50
% change+11+2+6+3
Ex-div:31 Oct   
Payment:13 Dec   
*Includes intangible assets of €670m, or 215¢ a share ***Does not include lease liabilities of €88.2m £1=€1.16