C&C share price up after chancellor resists drinks hike
SHARES in C&C were buoyed yesterday after the UK government announced a raft of positive measures for the drinks industry in the UK budget.
In afternoon trading, the drinks company's share price was up more than 4pc to €3.42 before closing at €3.34 -- a rise of 2pc -- after the British chancellor, George Osborne, said that duty on alcohol would remain the same and a 10pc above-inflation increase on cider that was imposed by the Labour government in March would be rolled back at the end of the month.
Although VAT will be increased by 2.5pc to 20pc from next January -- something which is estimated to add 6p to the price of a pint in UK pubs -- the budget was broadly welcomed by the drinks sector.
The industry already faced a rise in sales tax in January from 15pc to 17.5pc, but the duty-freeze effectively does away with the previous government's alcohol tax escalator that pledged to raise alcohol duty 2pc above the rate of inflation each year for the next five years.
C&C is expected to welcome the chancellor's decisions but is thought to be reviewing the budget in full before deciding whether to pass on the duty reduction to the consumer. C&C did not raise prices when the 10pc increase was introduced.
Paul Meade, of NCB stockbrokers, said the news from the budget was very positive for C&C's Magners and Gaymers ciders.
"(The reduction in duty) should benefit operating profits as C&C absorbed the March excise changes rather than increased selling prices. However, it should only have a modest impact as the duty increase was only operating since March.
"This signals that cider is likely to continue to enjoy a significantly lower excise tax regime under the new UK government," he said.
Meanwhile, in news that could have a direct affect on C&C's brands in the UK, Whitbread yesterday reported a strong start to its financial year.
In a trading update for the 13 weeks ending June 3, the UK's largest hotel and restaurant group said that like-for-like sales were up 7.6pc in its hotels and 3.6pc in its restaurants as a result of increasing competitiveness and attractive price/value composition.
Total sales across the company were up 13.5pc, while like-for-like group sales increased by 7.6pc.
"With Ireland and the UK enjoying record temperatures coupled with the football World Cup, we expect strong cider consumption trends both in the on and off trade now that C&C has a much wider portfolio of cider products," said Mr Meade.