Home is where the financial heart is for C&C

A few years ago, C&C, the Bulmers/Magners cider maker, was packing its bags to conquer the world.

Sick of the crummy Irish and British weather ruining its financial results – cider sales are heavily influenced by summer sun – C&C bought two cider businesses in the US. It also set its sights on conquering Australia and other far flung markets, its senior executives betting the farm on its international division as the main driver of future growth.

But C&C, an Irish drinks company run by a coterie of mostly Scottish executives, has lately been bringing it all back home.

Its financial results yesterday illustrated that the bulk of its profits – almost three quarters, in fact _ come from its operations in recession-weary Ireland and also Scotland, home of the once low-rent, now thriving, Tennents lager brand it acquired a couple of years ago.

Free cash flow
On the face of it, yesterday's financial results were a barnstorming performance. Sales up 30 per cent, profits up 10 per cent, dividends up 14 per cent and an Amazonian rate of free cash flow: C&C threw off more than €78 million of cash in the year to the end of February.

Scratch the surface, however, and the question arises as to just how long C&C can keep it up. Most of the growth in yesterday’s figures came from acquisitions, and for the next year at least, there will be no more acquisitions.

Stephen Glancey, C&C's chief executive, yesterday admitted that the company can swallow no more: "There are only so many acquisitions you can digest at once without getting indigestion," he said. "We think we have all the brands we need for the next 12 months."

In recent times, C&C has been on a shopping spree. It paid $305 million for the Vermont Hard Cider Company (VHCC) in the US in 2012; another $28 million for the US cider brand Hornsby's; €12.4 million cash plus debts of €45 million for the Irish drinks distributor Gleeson's; plus an undisclosed amount for Wallaces Express distributor in Scotland.

The company yesterday revealed, however, that once the contribution of acquisitions were stripped out of its strongly performing Irish division, sales climbed by a rather modest €2 million. Profits increased by €3.7 million, as it also scaled back on some of its advertising.

With no more acquisitions for a while, expect C&C to sweat its assets here, and launch a suite of new products, to boost its bottom line.

Foray
And what of C&C's much-vaunted foray into the US?

Glancey yesterday said this is one “for the long term”. Its US business struggled last year as C&C grappled with the integration of two major US cider purchases in short order.

Glancey denied the $305 million it paid for VHCC – sold a decade earlier for less than $3 million – was over the top. “It wasn’t a frothy valuation,” he said.

The company promised its US operation is now “primed to exploit” growth in the US cider category. So are its competitors, such as the Boston Beer Company.

C&C’s international business, especially the US, had better start throwing off pots of money soon.

The Celts can’t keep the show running on their own forever.