29th Oct 2014 10:47
LONDON (Alliance News) - Shares in C&C Group PLC were down on Wednesday after the Irish drinks company said pretax profit in the first half fell despite a rise in revenue, as it was hit by rises in excise duties, an increase in operating costs and tumbling US cider sales.
Pretax profit for company, which makes Magners cider and Tennent's lager, was down to EUR64.3 million in the half year to August 31, from EUR66 million a year earlier, despite a rise in revenue to EUR528 million from EUR486.4 million.
Excise duties increased to EUR159.9 million from EUR149.7 million and operating costs jumped to EUR289.9 million from EUR265.6 million last year.
C&C did not define the reason for the jump in operating costs in the period, but it did complete the integration of Irish drinks distributor Gleeson Group in the period and the integration of the Wallaces Express business in Scotland. The two acquisitions resulted in exceptional costs of EUR1.2 million in the half year.
The group proposed an interim dividend of 4.5 cents per share, up 4.7% on the year before.
It said its performance in the period was solid against tough comparatives for its Irish business, the early stage of its marketing programme in the US, and a competitive trading environment in England and Wales.
It added that the cider category in England and Wales remains very competitive at present and said its US arm suffered a disappointing performance, with its Woodchuck cider struggling against new market entrants.
Revenue for its Irish arm was up 1% to EUR221.6 million from EUR219.4 million a year earlier, while its Scotland revenue increased 37% to EUR172.8 million from EUR126.4 million last year, both on a constant currency basis. But England & Wales revenue fell in the first half, dropping 12.4% to EUR99.5 million from EUR113.6 million.
US revenue was down 22.6% to EUR20.5 million from EUR26.5 million, with volumes of its Woodchuck cider dropping 29.2% in the period. The group said that though it expected a weak performance from Woodchuck, the actual results were still below expectations.
Post the period end, C&C confirmed it has entered the bidding battle for Spirit Pub Co PLC, competing against FTSE 250 listed pub company Greene King PLC.
Commenting on its interest in Spirit, C&C Chief Executive Stephen Glancey said the company's route-to-market strength in Ireland and Scotland is not matched in England and Wales, adding the board of C&C believes its "commercial interests could be materially enhanced through direct participation in the management of high-quality retail assets".
The news of C&C's entrance into the Spirit bidding battle sent shares in the company dropping heavily after analysts from Shore Capital suggested the move to buy a pub company could "fundamentally change" C&C's business model.
Investec echoed the concerns about the deal on Wednesday, saying the company has still yet to provide sufficient detail on the rationale behind its interest in Spirit. It said it does expect C&C management, however, to provide more information on the deal in its upcoming conference call.
Investec also said that as all eyes focus on the Spirit bid, the first-half numbers from C&C came in below expectations.
Though C&C is unable to provide guidance on its operating profit owing to Takeover Code rules, Investec said it would probably cut its earnings per share estimates for the full year by 2% to 3%, driven by the underperformance of the US business.
The broker said the US performance was even weaker than expected, generating a profit well below expectations in the first half.
C&C shares were down 7.5% in mid-morning trade to EUR3.44.
By Sam Unsted; [email protected]; @SamUAtAlliance
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