ii view: cider maker C&C hit by lockdowns

Known brand names plus distribution contracts with industry giants. We assess prospects.

Trading update from 28 October to 06 January

ii round-up:

Magners, Bulmers and Tennent’s maker C&C Group (LSE:CCR) today detailed a tough December Christmas trading month given renewed government Covid restrictions across the UK and Ireland.

The Dublin headquartered company traded directly with 81% of its on-trade outlets such as pubs and bars, delivering 64% of the volume against an expectation of 90%. However, while the key festive December performance was consequently behind expectations, the company did still generate a modest profit for the month. 

CC Group shares fell by more than 4% in UK trading, having gained by around 60% since pandemic induced lows back in March 2020. Shares for premium mixers maker Fevertree (LSE:FEVR) fell by a similar amount on the day, while shares for Guinness and sprits maker Diageo (LSE:DGE) were down around 2%. 

CC Group’s profit performance for the second half will be affected by the nature, extent and duration of government restrictions. Consequently, management plans to offer an updated full-year profit forecast range at a trading update in March.

In late October, the company detailed an expected annual operating profit of €50-€55 million. Trading between September and November had proved modestly ahead of expectations, aided by factors such as positive consumer sentiment and its ongoing cost saving programme. 

C&C has manufacturing operations in County Tipperary, Ireland; Glasgow, Scotland; and Vermont in the US. Operating under the Matthew Clark, Bibendum, Tennent’s and C&C Gleeson brands, it supplies over 24,000 outlets in the UK and Ireland and also distributes for other major beverage companies such as Anheuser-Busch InBev (EURONEXT:ABI) – owner of the Budweiser brand.

ii view:

C&C Group’s other group brands include Heverlee, Menabrea, Five Lamps and Orchard Pig. Its makes and runs a portfolio of craft cider brands in North America and exports its Magners and Tennent’s brands to over 60 countries worldwide. A minority investment in the Admiral Taverns tenanted pub group is also owned.  

For investors, pandemic uncertainty has hit again. The dividend payment remains suspended and factors outside of its control such as the weather and the timing of sporting events also need to be remembered. Health issues and minimum unit pricing in the likes of Scotland alsoneed consideration. More favourably, its brand portfolio is solid, a cost saving programme continues to be progressed, while management has stressed its strong capital structure and adequate liquidity. For now, and given an update is due in March, a wait and see approach looks most appropriate. 

Positives: 

• Strong brand names
• Exclusive Irish distribution of Budweiser and Bud Light

Negatives:

• Less than 5% of sales from outside the UK and Ireland
• Halted dividend payment

The average rating of stock market analysts:

Buy