C&C Drinks profit impacted by fall in sterling

Premium drinks company C&C Group issued a pre-close trading update for the 12 months to 28 February on Friday, ahead of its preliminary results for FY17, to be announced on 17 May.

The London-listed firm said group operating profit was expected to be in the region of €94m-€96m.

Second half profit was broadly level year on year, despite the adverse impact of currency movements, the board explained.

FY17 volume performance in the three principal brands of Bulmers, Magners and Tennent’s was resilient and a significant improvement on FY16.

Bulmers was expected to post volume growth of 3% for the full year, compared to -13% in 2016, and Magners 7% growth compared to -6%.

Tennent’s volumes would be flat year-on-year, with 2016’s figure being -4%, though the board said it would have a growing share in the key independent free trade channel.

Niche and speciality volume, including Heverlee, Menebrea and Chaplin & Cork’s would be up at least 50% in the year, and now constituted 2% of group-owned brand volume.

“The major factor in the decline of Group operating profit was the devaluation of sterling,” the board explained in a statement.

“The cost reduction plans announced in October 2015 completed as planned in the second half.

“The benefits, however, were outweighed by incremental brand investment and price deflation attributable to changes in channel and pack mix across the group.”

C&C said its wholesale business stabilised in the second half of the year but did not recover the margin losses.

“The volume performance of our core brands and our growing niche/speciality portfolio was robust in FY17, despite challenging trading conditions.

“However, the impact of currency, negative market pressures on pricing and pack/channel mix have impacted the group’s profitability.”

In FY18, the board said it would continue to invest in its core brands to deliver long term growth, remain disciplined on costs and look to strengthen its route-to-market where possible.

“Given market dynamics and consumer concerns we remain cautious on the outlook for our domestic markets and are not anticipating improved trading conditions in the short term.”

C&C claimed it maintained capital discipline over the last 12 months, returning €66m to shareholders through a combination of share buybacks and dividends.

Cash generation remained strong, the board said, and there was no change to previous guidance targeting leverage of 2x net debt-to-EBITDA by the end of FY18.

“Our share buy-back programme has reduced our weighted average number of shares by around 7% year-on-year and should result in modest EPS growth on a constant currency basis.”