C&C falls 16% after revenues revised

CIDER MAKER C&C’s shares plunged 16 per cent yesterday after the company was forced to admit that it misstated the revenues it has earned in recent months in the trading update it issued to investors last week.

In what the company said was a “straightforward error in reporting lines”, C&C over-estimated its revenues in all of its key divisions on July 8th.

The company said its revenues over the four-month period up to the end of June had increased 3 per cent, whereas they had declined by 5 per cent.

Revenues from Magners cider in Britain, rather than falling by 1 per cent, fell 12 per cent compared to last year, while revenues from Bulmers, which appeared to have improved 7 per cent year-on-year after a dismal period for Irish bar sales, were actually flat.

C&C’s spirits and liqueurs division, which was reported to have suffered a 12 per cent decline in revenues, instead saw sales fall 22 per cent, according to the restated figures.

A spokesman for C&C said the error was reported to the market as soon as it was identified.

“The trading update was to revise operating profit guidance for the full year, and the basic guidance behind the trading update remains the same,” the company said in a statement.

The drinks group said it still expected operating profit for its current financial year, which runs until the end of February 2010, to be “at the top end of the group’s previously stated guidance of €77-€82 million”.

Despite the lower than reported revenues, C&C said trading in the March-June had been “encouraging” and that the group had “a greater degree of confidence about its plans for the current financial year”.

However, the company’s statement was not received well by investors, who had been surprised by how positive C&C’s previous trading update had been.

Mistakes of this nature are unusual for companies quoted on the stock market, and one Dublin-based dealer described the incident as a “big, big negative” for the stock.

On a day when trading volumes across the Iseq index of Irish shares were light, some 5.2 million C&C shares were traded – above the average for the stock. It closed at a price of €1.85, down 36 cent on Friday’s closing price.

NCB Stockbrokers analyst Paul Meade said the mistake would “put a question mark over management’s credibility as they continue to try and re-establish the Bulmers and Magners brands”. C&C appointed a new management team in November 2008, replacing former chief executive Maurice Pratt.

The company is now led by John Dunsmore, the former chief executive of Scottish Newcastle (SN), and his two former SN colleagues, Stephen Glancey and Kenny Neison, who are chief operations officer and strategy director respectively.

Mr Glancey is also group finance director.

Goodbody food analyst Liam Igoe said he would not be changing his earnings forecasts for the company because they were driven by volumes. As the company’s guidance on volumes remained unchanged, the error is understood to have related to pricing.

In recent months, C&C has cut its premium prices through various promotion deals in a bid to instigate a turnaround in volumes of Magners cider, which has lost market share in Britain as competition increased.