One to Watch: C&C

Published on Tuesday 6 January 2009 20:17

1.42 -0.05 Scotsman says BUY

C&C is a leading premium cider player in Ireland and UK. C&C owns the Bulmers brand in the Ireland and the Magners brand in the UK.

Cider accounts for 80 per cent of operating profit, with the balance coming from the group's spirits portfolio, which includes brands such as Tullamore Dew.

The group has endured a difficult time over the past few years as the market for its main cider brands, particularly in the UK, has become more competitive. In response to these issues, the company appointed a new management team led by Charles Dunsmore, a former chief executive of Scottish & Newcastle, to run the business. The new team has experience of managing a portfolio of mature brands in the UK and its remuneration package aligns its interests with shareholders.

Although the group faces a number of issues, we believe there are also significant opportunities. The Irish business should prove more resilient as the brand is better established and is operating on home soil. Benchmarking versus the peer group suggests considerable scope for cost savings particularly in sales and marketing as the brand profile matures. The group has sizeable excess manufacturing capacity that would be attractive to anyone who is short of volume in Ireland, either as an acquisition target or as an outsourcing partner.

As the new management team recently stated, it is unlikely there will be any quick fixes for the business, but with the share price somewhat underpinned by the replacement value of the manufacturing facility and the spirits portfolio, we believe the shares will prove to be an interesting investment opportunity.

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.