COMMENT: C&C Group nurturing green shoots?
Are those green shoots that we can see in the C&C Group cider apple orchards? The Magners maker may have reported another gloomy set of results this week, but its share price has risen to its highest point for eight months.
When C&C Group this week reported a 14% drop in net sales and net losses of EUR70m (US$95.6m) for the year to the 28 February, the story had almost written itself in advance.
A succession of poor summers and rising competition have made Magners' rise to prominence in the UK seem as distant as the reign of Elizabeth 1 over England. Recession in the country and in Ireland, where C&C sells Bulmers, have more recently threatened to turn a bad dream into a full-scale nightmare.
A series of grim warnings from C&C's new management team, led by ex-Scottish & Newcastle boss John Dunsmore, and announced job losses had left us in little doubt as to what to expect in the group's FY statement.
C&C's share price fell by 5% to EUR1.79 on the Irish Stock Exchange when the blow was finally delivered this week. However, shares in the group rallied throughout the second half of the week to reach EUR2 by midday today (15 May), the highest since 26 September last year.
Not only that, but C&C's share price has gained consistently since the dark sub-EUR1 days of early 2009 and has risen a little more sharply than a general recovery on Ireland's stock market.
So, is C&C on the road to redemption? Central to this week's shares rally was the group's announcement that cider volumes are up 9% in the new year-to-date, with sales revenue breaking even against the year before. The firm has also held its previous earnings guidance for fiscal 2010.
The group said that it aims to "stabilise" cider sales by volume for the full-year and plans to deliver EUR5m in annual cost savings.
Dunsmore and his lieutenant, COO Stephen Glancey, formerly operations director at S&N, have instigated several restructuring measures, including 120 job cuts at the Bulmers plant in Clonmel.
The measures, although an admission that C&C is operating at a scale beyond its current means and tough on those employees affected, may inject investors with a little more confidence in the group.
On a broader front, total cider sales in the UK are rising by 7% year-on-year in value terms, said Peter Spencer, managing director of C&C rival Gaymer Cider Co, in March this year.
C&C knows it is unlikely to regain the dizzying heights of the past. Half of Dunsmore's EUR7m incentive package only requires the group to hit a share price of at least EUR2.5 for 20 out of 40 consecutive trading days within the next five years. The firm's shares were selling for EUR5 this time last year.
Still, this week suggests that there are at least signs of life.
In the mean time, we would not be surprised to hear that C&C board meetings these days begin and end with prayers for a warm, bright summer across the UK and Ireland.
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