View from Dublin: time for C&C to can the acquisitions
Having spent more than €0.5bn - most of which it has since written off - on acquisitions over the past decade and failed to grow either profits or sales, drinks manufacturer C&C is going around in circles.
After another disappointing performance last year is it time to call time on C&C's strategy?
C&C operating (pre-interest) profits fell 8% to €95m (£82m) while sales (excluding excise duties) were down by over 15% to €559m (£480m) for the 12 months ended February 2017.
These disappointing numbers have fed through into the C&C share price, which has fallen 9% over the past year and under-performed the basket of beverage shares traded on the London Stock Exchange by 24%.
Best known for its Magners cider brand, C&C has been completely reshaped over the past eight years. In 2009 it paid global brewing giant AB InBev £180m for its tired Scottish lager brand Tennent's. The same year saw it fork out a further £45m for second-tier English cider producer Gaymer.
The following year it turned around and sold its spirits division, which included such iconic brands as Tullamore Dew and Irish Mist to Scottish distiller William Grant for €300m. C&C justified the sale of its spirits division on the grounds that its scale was "sub-optimal".
That doesn't seem to have deterred William Grant. It has done a superb job with Tullamore Dew, which in 2016 became the second Irish whiskey brand to break the one million cases annual sales barrier.
There was worse to come. In 2012 it paid a scarcely credible $305m for the Vermont Hard Cider Company (VHCC), which at the time was earning annual profits of $10m and had net assets of $10m.
In 2013 it paid €58m for Gleeson's Irish drinks distribution business.
Throw in the $27.5m it handed over for Hornsby's, 'the number two US cider brand' , in 2011 and that brings its total acquisition spend between 2009 and 2013 to €553m. Unfortunately, as those of us who have on occasion over-imbibed can testify, such a binge was inevitably followed by the mother and father of all hangovers.
If these acquisitions had delivered the goods then no one would have objected. But it is now crystal clear that they have not. C&C recorded operating profits of €212m and pre-tax profits of €198m on sales (before excise duty) of €841m in the 12 months ended February 2007. The results published last week reveal that C&C's sales have fallen by a third and its profits by more than half over the past decade.
To add insult to injury, C&C has ended up having to write off many of its over-priced acquisitions. Add it all up and these acquisition-related write-downs come to at least €280m and total exceptional items to €361m over the past three years. It is now clear that not only has C&C now completely written off its US business, it has also used exceptional items to significantly write down the value of some of its other acquisitions.
Between the jigs and the reels it would appear that C&C has now written off somewhere in the region of 60%, maybe more, of its total acquisition spend. Not to put too fine a point on it, if the performance of Tullamore Dew under William Grant's ownership is any guide, C&C sold good businesses and failed to replace them with a business of similar or superior quality.
This seems to have been particularly true of its US cider business which had total sales of just €24m and operating profits of a mere €700,000 last year. C&C's assurances at the time of the VHCC deal that US cider was a 'high-growth' category with annual volumes growing in excess of 20% now ring very hollow.
VHCC's volumes collapsed by a third last year and C&C has now farmed out the distribution of its products to US brewer Pabst - in a move widely seen as paving the way for an eventual sale of VHCC.
Far from being a high-growth category stateside, cider seems to have been just a passing fad with trendy consumers now increasingly opting for alcoholic soft drinks, flavoured malt beverages or fruit beer instead.
C&C seems to have made the classic mistake of buying at the peak of a short-lived fashion which it mistook for a sustainable long-term business.
The senior management team at C&C, including chairman Brian Stewart, chief executive Stephen Glancey and chief financial officer Kenny Nelson, are all alumni of Scottish & Newcastle (S&N), the UK brewing group that was gobbled up by Heineken and Carlsberg in 2008.
Unfortunately for C&C shareholders, their strategy of creating a sort of S&N in-exile hasn't worked. The reality is a string of over-priced acquisitions that range from the catastrophic to merely inadequate.
A C&C spokesperson pointed out that the company's share price was just €1 when the current management team arrived and that they have returned more than €150m to shareholders through share buy-backs.
Nevertheless, as its performance over the past decade shows, C&C's isn't growing, merely travelling around in ever-decreasing circles. The company clearly needs a change of direction.
When C&C shareholders gather for the company's annual general meeting on July 6 they need to make this point very clearly. Business as usual is no longer an option for C&C.