Tennent’s owner cheers City as pub trade recovers and debt falls

Shares in C&C Group, which also makes Magners Irish cider, climbed more than nine per cent after declaring it now expects to report an operating profit of between €45 million and €47m for the year ended February 28, boosted by recent “positive trading in the on-trade”.

The company had issued a profit warning in early January, when it said trading conditions had been “significantly impacted” by the reintroduction of mitigations to counter the outbreak of the Omicron variant. That came after official public health advice issued in Scotland in December urged people to not attend Christmas parties amid concern about the variant, sparking a huge fall in festive bookings in the hospitality trade.

Having guided in October that profits for the full year would be in the range of €50m-€55m, C&C warned in January that its performance in the second half would be “affected by the nature, extent and duration of government restrictions”. Those measures included the re-introduction of one-metre social distancing in hospitality settings, and requirement for table service when alcohol was served for consumption on the premises.

In a trading update yesterday C&C, which supplies around 35,000 pubs, bars, restaurants and hotels through its Matthew Clark, Bibendum and Tennent’s wholesale businesses, said the business had seen a positive bounce back in the on-trade with the easing of restrictions.

“We were back trading with 81 per cent of direct delivered outlets in February 2022 versus February 2020, with corresponding volumes at 68% and momentum building as outlets continue to re-open,” C&C said.

C&C, which acquired the Tennent’s business from AB InBev for £180m in 2009, looked also to have cheered the City with its outlook on costs as inflation surges and supply chain disruption persists, and with its progress on cutting debt. It highlighted the “degree of protection” provided by an €18m cost reduction plan, which has been “successfully executed”, recent price increases and input cost hedging. It now expects net debt to have been reduced to €263m by year-end on February 28, compared with €442 at the close of its prior financial year.

“This significant reduction in net debt, together with an improving business performance, will substantially enhance our financial flexibility and enable C&C to deliver our strategic objectives, to drive growth for C&C and returns for shareholders,” the company said.

Barclays explained in a note for investors that C&C, against a backdrop of inflation accelerating because of “tensions” between Russia and Ukraine, has long-term hedges against rising barley costs. But the hedges it has in place for aluminium and energy inputs, “which are the two commodities it is seeing most inflationary pressure”, provide cover for less than a year.

Barclays added: “Following price increases in November 2021, C&C reiterated that it sees scope for further price increases should inflationary pressures persist.”

First Minister Nicola Sturgeon disappointed on-trade campaigners on Tuesday when she announced that the legal requirement to wear face coverings on public transport and in most public places will continue until at least early April. The Scottish Licensed Trade Association said the difference between Scotland and England, where it is no longer a legal requirement to wear a face covering, will confuse consumers. “All this does is put yet more pressure on licensed hospitality businesses to police this requirement,” said spokesman Paul Waterson. “It’s hugely unfair that staff should have to tell customers they cannot enter their premises unless they are wearing a face covering.”

He added: “The licensed hospitality sector is at a stage now where business is picking up – this makes the messaging confusing for visitors from England who will support our hospitality businesses.”

C&C shares closed up 17.7p, or 9.3%, at 207.8p.