C&C's operating profit up 10% on strong cider sales

A strong performance from cider offset difficult trading in soft drinks and snacks at C&C over the first half, helping the firm to post better than expected results yesterday.

Turnover at the company rose by 9 per cent to €420 million, boosted by the successful launch of Magners cider in the London market during the period, while operating profit increased by 10 per cent to €68.4 million.

C&C reported a 34 per cent increase in marketing investment in the six months ending in August for Magners, Ballygowan and Club Energise.

Adjusted earnings per share (EPS) rose 14 per cent to 16.2 cent, ahead of market expectations. C&C said it would pay an interim dividend of 6.5 cent per share, an 18 per cent increase on last year.

The shares rose 11 cent, or more than 2 per cent to €5.26 as the group sounded an upbeat note about the future. C&C believes that despite the extra spending required to continue the Magners rollout, it can deliver moderate EPS growth for the full year ending in February, followed by double-digit growth the following year.

It is forecasting mid-single digit growth in operating profit in the second half as the strong performance of its cider division continues to drive growth, although its other divisions are unlikely to match their year-ago performance, it said.

Cider revenues rose 28 per cent in the first half to €144.5 million, while operating profit was up by nearly 27 per cent to €45 million as good summer weather helped Bulmers outperform the long alcoholic drinks market in the Republic, with growth of 8 per cent.

Magners has performed ahead of expectations and is sold in 29 per cent of pubs in the greater London area, where it has captured a 0.8 per cent market share.

The picture in the international liqueur and spirits business was more mixed, however, with Tullamore Dew recording strong growth while Carolans declined. Turnover in this business rose by 3 per cent to €29 million, while profits were up by close to 12 per cent to €7.6 million.

The snacks and soft drinks division had a tough first half, with revenue down 0.9 per cent to €129 million. Operating profit fell by 20 per cent to €13.3 million, which chief executive Maurice Pratt called "not satisfactory".

C&C expects the weak overall trend in the soft drinks and snacks division to continue in the second half of the year. But finance director Brendan Dwan said the benefits of its reorganisation of Tayto and the fact that its marketing investment is more heavily concentrated in the first half means that while there will be a further decline in profit, "it will be on a much reduced scale compared to the first half".

C&C's distribution division recorded operating profits of €2.4 million, a decline of 20 per cent on turnover of €117 million, a 4 per cent increase. The division faces uncertainty as C&C negotiates new distribution arrangements, following the Allied Domecq takeover by Pernod Ricard this summer.