C&C furloughs staff, pulls dividend

C&C Group has temporarily laid off most of its workforce, cut salaries and pulled its final dividend, as the drinks manufacturer and distributor looks to weather the Covid-19 pandemic.

The Dublin-based group, whose brands include Bulmers, Magners and Tennent’s, has furloughed approximately 70% of employees and introduced an average 20% salary cut across the workforce.

The executive leadership team and the board will reduce their remuneration by 30% and 40% respectively for three months initially.

C&C said it wanted to reduce operating costs, maximise cash flow and maintain and strengthen liquidity in light of the Covid-19 outbreak. It has therefore also cut capital spending "significantly", with it now expected to be in the range of €7m to €10m in 2021, and has received confirmation that it is eligible to issue commercial paper under the Bank of England’s Covid-19 Corporate Financing Facility.

The group said: "Given the absolute focus on cash conservation, and the group’s decision to avail of government support through this crisis, the board believes it is neither appropriate nor prudent to declare a final dividend for 2020."

As well as its own brands, C&C is Ireland and the UK’s leading drinks distributor to the hospitality sectors and supplies more than 35,000 pubs, bars, restaurants and hotels. Lockdown measures introduced following the Covid-19 outbreak have hit the hospitality sector particularly hard, with leisure venues in both countries currently closed.

As at 1115 BST, shares in the FTSE 250 firm were 2% lower at 193.6p.

Shore Capital, which has reinstated its ‘buy’ rating on C&C, conceded that the coronavirus crisis was likely to cause "long-lasting damage to the on-trade".

But it argued that even a 20% decline in the market "could still leave C&C’s 2022 EBITA above €100m, and February 2021 net debt below €300m. Valued on just 9 times EBITDA, under this scenario the market appears more bearish. So what doesn’t kill you makes you stronger".

"Supported by its fabric brands, market intelligence and nationwide distribution, we see the opportunity for C&C to broaden its brand portfolio, which over time should lead to incremental earnings and a re-rating towards its beverage peers.

"C&C is a unique way of playing the post-lockdown UK on-trade market."