C&C, the drinks group that owns brands such as Magners, Bulmers and Tennent’s, has revealed that it has seen demand in hospitality venues weaken in recent months as cash-strapped consumers start to rein in their spending.
The Dublin-based business, which is also a major drinks distributor, noted in a brief first-half pre-close statement that trading had been “robust” at the start of its current financial year before seeing a slowdown in on-trade momentum in the second quarter as surging inflation took it toll.
However, it still expects to report a 35% increase in revenues to around €900m for the six months to 31 August as it continues to bounce back from the effects of the pandemic. Operating profits will more than triple from €16m last year to between €52m and €55m.
The group added that it expects to report a net debt to adjusted underlying earnings ratio of approximately 1.5x, reflecting the benefit of €43.0m in proceeds from the first two tranches from the sale of its interest in Admiral Taverns, as well as “good cash generation” from the business over the half.
“As a consequence of the group’s balance sheet strength and strong cash flow generating capability, it is the board’s intention to review the potential return of capital to shareholders, including dividends, in H2 FY2023,” said C&C.
The group’s shares closed down 8% yesterday amid concerns about how the cost of living crisis will affect consumer demand. Pub landlords have also warned in recent weeks that they will have to close their businesses due to unaffordable energy prices.
The new Prime Minister Liz Truss has announced that businesses will get support on energy costs for six months. Whilst leaders from the hospitality sector have welcomed the measure, they have said more help will be necessary to prevent more venues from closing.
“We need clarity and assurance for the long term so our brewers and pubs can plan effectively and thrive at their heart of their communities long into the future,” said Emma McClarkin, Chief Executive of the British Beer and Pub Association.
“The cost of doing business is still a very real threat for many, but we are encouraged by the direction this Government is going in. Now we need to hear more on business rates, VAT and keeping beer duty low.”
NAM Implications:
- Much of the increased cost of living is still in the pipeline.
- A cold Winter does not augur well.
- Some of the C&C improvement comes via price increases…
- …in a still uncertain economic environment.
- Given that, worth crossing fingers…
