C&C may restructure ailing UK operation if €1bn Spirit bid fails

C&C, the Bulmers/Magners cider maker which has lost about an eighth of its market value in the last week, says it may look at "downsizing" its struggling business in England and Wales if it fails to take over the Spirit Pub Company, for which it is preparing a bid in the region of €1 billion.

C&C has already had a preliminary approach for Spirit, which operates 1,200 pubs mostly in the southeast of England, rebuffed but it is understood to be preparing a fresh approach. The company, which yesterday announced a disappointing set of interim results, said its management is now reviewing the “optimal structure” for its English and Welsh operations.

Kenny Neison, the group's chief financial officer, yesterday said buying Spirit "is not the only option" open to C&C as it looks to transform the performance of its English/Welsh operation, where its operating profits fell by more 36 per cent in the six months to August 31st.

Pubs sector

“We’re very interested in the pubs sector,” said Mr Neison, “but we could also look at downsizing the business in England and Wales, and go down the export model. It wouldn’t necessarily involve job losses.”

The company’s preference, however, remains to “vertically integrate” its business in England and Wales through the purchase of pubs to give it guaranteed retail outlets to sell its ciders and other drinks, such as Tennents.

Stephen Glancey, C&C's chief executive, rejected recent speculation among analysts that the company could sell its US business, which has also underperformed since it paid $305 million for a Vermont cidery two years ago.

“We’ve told the analysts that we are investing properly in the US and we are repositioning the brands so that they are focused on the craft sector,” he said.

Investing in US

“We are investing in the US for the long term. We are promoting our brands heavily on social media in the US and on radio, and we think we are doing the right things. We are also developing a long innovation pipeline.”

C&C’s shares fell almost 8 per cent yesterday, after it reported a slump in profits at its US and part of its British operations. Overall, its net revenues climbed by almost 10 per cent to €368 million, although its operating profits fell by 2.7 per cent to just over €69 million.

The group's Irish and Scottish operations performed strongly. Operating profits over the six months to the end of August in Ireland rose by more than 11 per cent to €36.7 million. In Scotland, where the Tennents lager brand is particularly strong, operating profits climbed by more than 14 per cent to €22.4 million, boosted by acquisitions.