CC shares climb 9% despite profit warning

SHARES IN Irish drinks group C&C rose by almost 9 per cent yesterday in Dublin in spite of the company issuing a profit warning and cutting in half its full-year dividend payment.

Chief executive Maurice Pratt resigned after seven years at the helm, and the company said it would undertake an "in-depth review of its marketing and commercial strategy in Britain with a view to restoring revenue growth" at its Magners cider business.

A subcommittee of the board, led by businessman Philip Lynch, has been formed to assist CC's management team with the review of the British operation.

Mr Pratt said he had decided to step down because the "repositioning strategy" he had sought to execute in Britain for Magners over the past two years had not worked.

"As chief executive, I have to be accountable and take responsibility for business performance," he said.

"The company has to take important strategic choices and I have therefore decided it is time to stand aside and allow a new CEO to bring fresh thinking and impetus to the business."

Mr Pratt, who masterminded CC's stock market flotation earlier this decade, will remain in his role until a successor is appointed.

At one point in early 2007, CC's shares traded at close to €14 each. Yesterday, the shares were trading below €1.50 and closed at €1.47.

This dramatic decline has been the result of a steady erosion of Magners sales in Britain, which were affected by two summers of bad weather and increased competition from rival Scottish Newcastle.

CC's revenues declined by 13.2 per cent to €302.4 million in the six months to the end of August while its operating profit, before exceptional items, fell by 0.7 per cent to €66.5 million.

In terms of the outlook, CC said it expected the continuation of current market trends in Ireland and the company's "performance trends" in Britain to lead to a "material drop" in its operating profit in the second half of the year.

CC's cider sales volumes declined by 12 per cent during the six-month period, while its Irish whiskey brand, Tullamore Dew, grew by 11 per cent.

The Clonmel-based drinks company said its restructuring and cost-reduction plan was on target to achieve a net €10 million in annual savings.

CC said it was cutting its dividend payment in half in light of "performance trends" and the expected impact of sterling depreciation over the next two years.

In terms of exceptional items, CC booked a €5 million gain from the cancellation of "surplus sterling forward contracts" for 2008.

It also announced the sale of its wine and spirit distribution business in the Republic to a subsidiary of DCC for €9.6 million.

A joint venture or strategic alliance for Magners could be on the cards, although Mr Pratt would not comment on what direction the group should take, preferring to leave that to his successor.

He expects to continue in a caretaker capacity for a few months while a replacement is identified.