Ireland-based C&C Group PLC (CCGGY, Financial) (LSE:CCR, Financial) has really taken it on the chin with the pandemic closures. The brewer and distributor has suffered greatly with pub closures around the British Isles. Before the pandemic, the company had nice cash flows, was profitable and had a huge dividend. If the company can get back close to where it was in 2019, the stock will skyrocket.
The stock trades for 2.38 pounds ($3.26), there are 393 million shares and the market cap is 935 million pounds ($1.28 billion). I can’t use the price-earnings ratio because there is a loss and can’t use dividend yield because the dividend has been suspended.
Sales were 736.9 million euros ($865.8 million), down 56.1%. The distribution business was hit hardest with a drop in pub closures. Sales were down 69% to 337.8 million euros. The company had a rights offering back in June, issuing 77.1 million shares for 186 pence to raise 143.5 million pounds.
C&C has a portfolio of brands better known in Europe than the U.S. Bulmer’s and Magners are two well-known ciders. Tennet’s is the leading beer in Scotland.
In the U.S., we are familiar with Woodchuck Cider, which has witnessed its market share erode over the years. Earlier this year, C&C sold off Woodchuck for a paltry $20 million to Northeast Drinks Group. I’d have to do some research, but C&C took a bath on Woodchuck.
Major shareholders have switched over the years. Third Avenue Funds and Southeastern Asset (Longtree) used to be major holders, but they gave up. The stock used to trade at a price-earnings ratio of 15 and had a dividend yield north of 4%, making it a classic value stock. But the pandemic has put a kink in things. Polaris holds shares, though, and it is a pretty good value fund.
I’ve followed the stock for six years and owned it for five. We’re down about 38%, not counting dividends. I used to think C&C was a buyout candidate, but I’m not so sure anymore. Most of the beer world revolved around Anheuser-Busch Inbev (BUD, Financial) and Heineken (HEINY, Financial). I also used to be concerned about competition for its cider products since Inbev and Heineken were horning in on that business. Then management did something brilliant—it purchased a major distributor.
I don’t know how they got their hands on a distributor because in the U.S., there are only a handful of distributors and they aren’t selling. C&C has been inserting its brands into its distributors, Mathew Clark and Bibendum. Also, C&C has a joint venture with Admiral Taverns. The company is inserting it brands into Admiral as well. C&C distributes Anheuser in Ireland and Tito’s Vodka in the U.K. Great partnerships!
Going back to happier times in 2019, the dividend was 15.31 euro cents and earnings per share were 26.6 euro cents. So if C&C ever returns to happy times, the stock would yield 6.4% and earning per share would be 8.9 euro cents. That’s a big if.
The reason we hold onto C&C is that if we ever get through the pandemic, pubs will reopen in the British Isles. When this happens, C&C should continue to integrate its brands into its pubs and distribution business.
