ii view: Tennent's and Bulmers maker C&C fizzes to multi-month high

Full-year results to 28 February

• Revenues up 13% to €1.67 billion (£1.4 billion)
• Operating profit up 17% to €77 million (£65 million)
• Net debt excluding leases up 23% to €81 million
• Final dividend up 4% to 4.13-euro cents
• Total dividend for the year of 6.13-euro cents 

Chief executive Roger White said:

"The Group has progressed on a number of fronts over the last year, despite the ongoing challenging macro and market backdrop. Our Premium brand performance is encouraging, benefitting from ongoing consumer appeal for premium beer and cider which is driving growth in this segment.

"Looking ahead, year to date trading is encouraging. With the key summer trading period ahead, we are executing our plans for the year, supporting our customers, investing in innovation and brand-building, people, and systems, whilst continuing to simplify the business and control costs.”

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ii round-up:

C&C Group (LSE:CCR) today flagged gains in market share for each of its Tennent's and Bulmers brands, with the maker and distributor of alcoholic and soft drinks expecting a limited impact from US trade tariffs.

A 13% increase in annual sales to €1.67 billion (£1.4 billion) helped drive operating profit for the full year to late February up 17% to €77 million (£65 million).

Shares in the Dublin headquartered company rose 2% in UK trading having come into these latest results down by a tenth over the last year. That’s better than a near one-quarter fall for Guinness and spirits maker Diageo (LSE:DGE). The FTSE All Share index is up 5% over that time.

As well as making and marketing drinks, C&C is also a leading distributor of beverages to the UK hospitality sector via its Matthew Clark Bibendum business. 

A strong recovery in service levels helped the distribution division drive growth in customer numbers of 8% year-over-year. 

A rise of 4% in the final dividend to 4.13 euro cents per share, and payable to eligible shareholders on 18 July, makes for a total annual payment of 6.13 euro cents per share. 

C&C continues to target shareholder returns of €150 million via a mix of dividends and share buybacks over the three fiscal years to late February 2027. A further €15 million tranche of its buyback programme began on 1 May. 

Management is still reviewing the impact of US trade tariffs on the group’s exports to the US, although it continues to expect no material impact. A temporary 90-day suspension of the additional 50% levy on top of a standard 10% tariff was introduced on 9 April.

A first-half trading update may be announced mid to late September. 

ii view:

C&C brands include Tennent's, Magners, and Bulmers, along with craft ciders and beers such as Orchard Pig, BlackThorn, Menabrea and Clonmel Irish larger. Branded, or drink related profits totalled 60% in this latest year, with distribution the balance of 40%. Geographically, the UK accounted for most sales at 81%. That was followed by Ireland at 18%, and other countries including the US at a combined 1%.  

For investors, although only a tiny proportion of overall sales, some uncertainty regarding exports to the US persists. The impact of the weather on sales should not be forgotten. Previous operational challenges have included a new computer system and the pandemic, while C&C lacks the geographical diversity of sales found at rival drink makers such as Pernod Ricard SA (EURONEXT:RI). 

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To the upside, any eventual US trading tariffs imposed are expected by management to have a minor impact on performance. Strong brands sit alongside some diversity of operations given both brewing and distribution. Despite increased debt, a leverage ratio of 0.9 times continues to look manageable, while an estimated price-to-net asset value ratio of 1.2 times sits below the three-year average of 1.5 times, suggesting potential value. 

In all, and despite ongoing risks, a focus on shareholder returns, forecast dividend yield in the region of 3% and a good start to the year should cheer up patient investors.

Positives: 

• Strong brand names
• Diversity of operations

Negatives:

• Uncertain economic outlook
• Exposure to fuel prices given distribution and brewing

The average rating of stock market analysts:

Buy