CC blames weather and economy for decline at Bulmers and Magners

REVENUE FOR the first half of the year at drinks group CC is "unlikely" to match last year's level, as a weakening economy combined with bad weather saw the group record a revenue decline of 8 per cent over the past four months. This four-month period is thought to represent in excess of 50 per cent of half-year revenue

At the company's agm yesterday, CC Group chairman Tony OBrien said it was unlikely that the firm would now match revenue levels achieved over the six months to August 2007, but improved operating margins during the period should, at least, offset the impact of revenue decline on operating profit.

According to the group's interim management statement, in the four months ended June 30th revenue declined by 8 per cent compared with the same period last year, as CC's cider brands, Bulmers and Magners, suffered a decline of 10 per cent.

Revenue for the group's spirits and liqueurs division, which includes the Tullamore Dew and Irish Mist brands, grew by 3 per cent.

The group performed well during the first three months of the fiscal year (March to May), but was hit badly by unsettled weather and a deteriorating economic backdrop in CC's principal markets in June. Cider revenue declined in both Britain and Ireland in the period, while the on-trade business was hit particularly hard in Ireland.

Group operating profit, however, increased during the period under review, reflecting improved operating margins arising principally from the cost-reduction programme initiated last February. CC expects that these gains should offset the impact of revenue decline on operating profit.

Moreover, the group said that Magners Draught, which was launched in the UK in May, was now progressing well after a slow start.

Stockbrokers said that the statement was broadly in line with expectations. NCB is holding on to its "add" rating for the stock and is forecasting a 3 per cent earnings per share (eps) growth for 2009. John OReilly, an analyst with Davy Stockbrokers, said that the second half of the year could "prove particularly challenging" for the CC Group. He is of the opinion that holding last years cider market positions would be a good achievement.

The group was criticised at the agm for becoming a "one-trick pony" following the divestment of its soft drinks business last year. Responding, chief executive Maurice Pratt said that the group took the decision to concentrate on higher-margin business and still holds that view today.

The group confirmed that it will pay a final dividend of 15 cents a share, making a total dividend of 27 cents for the year.