By Scott Wright
THE drinks company that owns Glasgow-based Tennent’s Lager saw its share price fall sharply after issuing a profit warning yesterday.
Dublin-based C&C Group highlighted continuing cost-of-living pressures and the impact of rail strikes on footfall in urban areas during the crucial festive period, as it revised down its earnings expectations for the full year.
Shares fell by nine per cent as the company cited data compiled by hospitality analyst CGA UK, which measured booking cancellations across the sector at around 30% over the festive period, and “walk-ins” down 28% on 2019.
C&C, which makes Magners Irish cider and owns the Matthew Clark drinks wholesale business, declared it now expects its full-year operating profit will be in the €84-€88 million range, despite year-on-year net revenue growth of around 20% in December. The previous consensus among analysts had been for full-year profits of €95m.
The company said: “We believe consumer spending pressure is a driver behind this trading performance and will continue to be so in the near-term. Further, trading has been significantly impacted by rail network strikes in the UK, reducing footfall in urban areas over the key festive trading period.”
The update from C&C came after the company, led by chief executive David Forde, had warned in October that trading conditions would be challenging in second half of the year because of inflationary pressures on its customers and consumers, although it highlighted the World Cup in Qatar and the first restriction-free Christmas in three years as positive “tailwinds”.
The company booked an operating profit of €54.9m for the six months ended August 31, up from €15.5m.
Analysts at Davy Research said in a note for investors: “The company has cited a number of drivers, including consumer spending pressure (both GB and Ireland), which is likely to persist, and the footfall impact from rail network strikes in the UK. We would assume that volumes are down materially versus pre-Covid levels, which drives negative operating level.”
Davy expects C&C’s underlying profits for the full-year will come in at the mid-range of guidance at around €86m, which it said would be a downgrade of 9-10%.
The C&C update underlines the continuing pressure the hospitality industry is coming under from a crippling cost crisis, driven to a large extent by the surge in energy bills following Russia’s invasion of Ukraine.
Business groups reacted with disappointment earlier this week when Chancellor of the Exchequer Jeremy Hunt cut the amount of support for business from elevated energy bills. The Chancellor announced that the current energy relief scheme will be replaced by a new discount model based on the unit costs of gas and electricity, which the Federation of Small Businesses in Scotland said would result in a “significant reduction” in support and have “real-world impacts”.
The industry also reiterated concerns this week over a lack of relief from business rates and costs associated with the controversial deposit return scheme, which is due to go live in August despite widespread criticism over the proposals.
Colin Wilkinson of the Scottish Licensed Trade Association said: “Many businesses in the hospitality sector in Scotland have had a bitterly disappointing December – normally one of the year’s key trading periods for the sector – as a direct result of the economic crisis, train strikes, poor late-night public transport and lack of taxi provision in some towns and cities. We’re into the second week of January and these challenges remain.”
C&C said: “Despite the near-term challenges, the group will continue to operate well within its stated leverage range (less than 2.0x) and this coupled with our strong free cash flow generation will ensure that our stated capital allocation objectives are maintained. C&C will continue to review and drive efficiencies throughout our business while ensuring we deliver a market leading offering to our customers and consumers.”
Shares in C&C closed 16.6p lower at 167.2p.
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