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C&C operating profits fall

By BFN News | 07:54 AM | Wednesday 28 October, 2015


Branded cider, beer, wine and soft drinks group C&C's operating profit fell by 9.5% to �?¬62.6m in the six months to the end of August reflecting a challenging period in core markets of Ireland and Scotland. The group saw significant growth in its export business with expanding opportunity in new markets and a stable performance in C&C Brands. But it said the US business was below expectation and action is under way to improve earnings for FY17. Net revenues were down 2.6% at �?¬358.6m and EBITDA fell by 10.4% to �?¬72.6m. Group chief executive Stephen Glancey said: �€?Our performance in the first half reflects difficult trading conditions in our core markets of Ireland and Scotland. Many of the factors contributing to this are one-off or transitional, including poor weather; the transition to a brand led wholesale model; and, legislative change in Scotland. In aggregate, the headwinds will adversely impact profitability by �?¬10 million in the financial year. Positively, the reception to our new brands such as Heverlee and Menebrea, access to the Drygate range and the launch of our new craft cider, Dowds Lane Big Vat cider to complement our Five Lamps craft beer in Ireland has been good. "In C&C Brands, earnings showed modest growth in the first half in line with our stated objective to stabilise performance. The business successfully executed a sizeable cost reduction plan, providing the capability for a stronger share performance from Magners Original. This provides a better platform for brand investment in FY �€?17 and a continuation of the recovery. In the US, we are driving changes to improve profitability in FY �€?17 and we are exploring new ways of strengthening market access. "Performance in our Export business was excellent, with 31% earnings growth fuelled by Magners, Tennent�€?s and Shepton brands. Our well invested domestic asset base enables the Group to capitalise on these volume opportunities with minimal incremental cost. We see the cider category continuing to accelerate growth internationally through increased penetration and new market development. "Asia Pacific, Europe and Africa all performed well. Margins are attractive, even at high levels of marketing investment. We have put in place new distribution arrangements for Poland, South Korea and Nigeria with further countries to follow in the second half. "We have generated excellent free cash in the first half and expect full year cash conversion of c.70% of EBITDA. The Group�€?s balance sheet is strong, and as highlighted in July, provides the Board with the flexibility to invest in the business as well as return capital to shareholders. We are intending to re-initiate share buy backs with a view to returning up to �?¬100 million to shareholders by our AGM in July 2016. "Over the last six months there has been a lot of M&A activity in our sector with valuations reflecting both availability of liquidity and asset scarcity. We believe that the landscape will continue to evolve in the next twelve months. We have and will continue to review acquisition opportunities to optimise value for shareholders but only if they deliver superior and sustainable long term returns which are in keeping with our return parameters. "Looking ahead, we expect improved operational performance in Ireland and Scotland as we move through the second half and into FY�€?17 underpinned by ongoing cost saving initiatives, sustained investment behind our brands and increased emphasis on niche and premium. "We are assuming that market conditions will continue to be testing particularly in our core markets in the coming months but we are confident that we are taking the right actions to build durable, long-term value for all shareholders and this is reflected in a 5.1% increase in our interim dividend.�€� Story provided by StockMarketWire.com

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