Martin Flanagan: Big profits as C&C pays out for another drinks round

The move into beer – Tennent's has given the group Scotland's best-selling lager – has provided C&C with some timely insulation against the tougher conditions in its key cider market, as its trading update showed yesterday.

C&C, before its 185 million purchase last August of the Scottish and Irish businesses of Anheuser-Busch, was essentially a mono-brand drinks company best-known for Magners cider.

The former S&N management team that had moved into the Irish group a little over a year ago under a private equity-style arrangement, led by former S&N boss John Dunsmore, quickly decided it needed to bulk up.

It was feared the business would atrophy and the team did not want an atrophy asset.

Chief executive Dunsmore, and his former S&N confederates Stephen Glancey and Kenny Neison, now C&C's chief operating officer and strategy director respectively, have not let the hops grow under their feet.

First was that Anheuser acquisition, and then they followed that with the 45m purchase last November of the cider assets of Constellation Brands, which has a portfolio including such resonant names as Gaymers, Blackthorn and Olde English.

Yesterday's update illustrates the resulting resilience that the move into beer has given C&C.

Underlying revenues fell 9 per cent in the third trading quarter, the group said. But this masked a 13 per cent decline in the cider division. Beer – and Tennent's – has cushioned the blow.

Costcutting has also helped C&C despite the tougher trading conditions, with the group saying that, even excluding the Anheuser-Busch deal, full-year operating profits will be towards the top end of a range of market expectations from 77m to 82m (68-72m).

However, taking the beer brands into the equation will add 7m to operating profits this year, the company says. This is more than the market expected, and implies an operating profit this year of 89m.

It is still early days, but it seems clear already that Dunsmore and his former S&N team have decided the way forward for C&C is to introduce a big-company mentality into a relatively small player (even if one that had demonstrated superb marketing "smarts" with Magners) on the drinks canvas.

Otherwise, the danger might be that C&C is picked off by players that are many times its size in key markets.

If, as is rumoured, C&C consolidates its Tennent's foray with significant spending increases in both sports sponsorship and marketing this year, this process of bulking up at the group should gather momentum.

Wilbur eyes the Rock

THE most fluid state of British banking for decades may flush out more than the "usual suspect" financial players seeking opportunities for acquisitive expansion.

Several brand names are to come up for grabs, partly to meet European Union rulings over the quid pro quo with some British banks for their state aid.

These include Lloyds Banking Group's Cheltenham & Gloucester and Intelligent Finance, and Royal Bank of Scotland's historic Williams & Glyn's operation.

The likes of Sir Richard Branson's Virgin Money, and Tesco and Sainsbury's banking operations are routinely associated with potential moves on such operations.

But yesterday's news that American turnaround specialist Wilbur Ross is also eyeing opportunities in the UK banking market shows how widespread is the interest in this state of flux.

Ross may be unknown to most Britons, but he was part of the Virgin consortium that hovered around Northern Rock before it was nationalised.

And his fame is such stateside that Fortune magazine – the coffee table bible of millionaires – called him the "King of Bankruptcies" over a decade ago.

He now says he may be interested in making a move on Northern Rock down the line with old chum Branson. The UK banking asset sale is beginning.