Magners owner C&C Group says on-site sales are losing momentum as cost of living pressures rise
- C&C Group expects operating profit to more than triple to 52-55 million euros
- It also forecasts revenue to grow by 35% and surpass pre-Covid levels
- The Dublin-based company produces the Magners and Bulmers cider brands
The C&C Group admitted that demand from hospitality venues had slackened in recent months amid mounting cost pressure on consumer spending.
The Dublin-based drinks maker, which produces Magners and Bulmers cider brands, said trading had been “robust” at the start of the current financial year before seeing a slowdown in business momentum in the second quarter.
However, it still expects to report net revenue of around 900 million euros for the six months to the end of August, a 35% year-on-year increase and a slight increase in pre-pandemic volumes.
Cheers: C&C Group, which produces cider brands Magners and Bulmers, said trading had been ‘robust’ at the start of the current financial year
For the same period, the company is expected to announce that its operating profits will more than triple, from 16 million euros last year to between 52 and 55 million euros this time around.
It also expects to hit its net debt to adjusted underlying earnings ratio target of around 1.5x due to the £55m sale of its stake in pub chain Admiral Taverns and a healthy cash generation.
C&C Group sales recovered strongly as consumers returned to pubs, bars and restaurants in the British Isles in droves following the easing of Covid-related restrictions.
Net catering revenues in Britain soared to 1.21 billion euros last year, thanks in part to growth in volumes of its branded products, such as Magners and Tennent’s Lager.
The London-listed company also attributed its performance to successfully managing supply chain issues, including shortages of drivers and warehouse staff and rising carbon dioxide prices.
Due to these factors, it rebounded from an operating loss of 63.6 million euros in 2020 to an operating profit of 47.9 million euros and reduced its net debt by 38.6 % to 271.3 million euros.
Strong demand: C&C’s net income in Britain soared to 1.21 billion euros last year, partly driven by volume growth of its branded products, such as Tennent’s Lager
But C&C chief executive David Forde warned the company was “operating in an evolving and challenging inflationary cost environment” and would need to raise prices in response to soaring costs.
“Despite the current positive sentiment in the hospitality sector post-reopening, we are aware of the pressures facing consumers and their potential impact on future demand,” he added.
Shares of C&C Group closed down 8.1% at 159.8p on Wednesday, making it the second biggest drop in the FTSE 350 index behind Ocado. Since the beginning of the current year, their value has fallen by a quarter.
Today’s trade update comes a week after new Prime Minister Liz Truss announced that households would have their annual energy bills frozen at £2,500 for two years, while businesses would have their prices capped for six month.
Hospitality executives welcomed the latest move, although they said more help was needed to prevent more sites from closing.
“We need long-term clarity and assurance so that our brewers and pubs can plan effectively and thrive at the heart of their communities for the long term,” said Emma McClarkin, chief executive of the British Beer and Pub Association.
“The cost of doing business is still a very real threat to many, but we are encouraged by the direction this government is taking. We now need to know more about business tariffs, VAT and the maintenance of customs duties on beer at a low level.”