Cantrell & Cochrane, the object of a £580 million (€736.45 million) management buyout a year ago, aims to float on the Dublin and London stock markets within the next two years. But it will need acquisitions in the meantime to give it the required scale for a plc, group managing director Mr Tony O'Brien has said.

Mr O'Brien was speaking to The Irish Times after C&C reported its first set of results since the MBO. In the year to the end of August, the drinks and food group increased its turnover by 10 per cent to £431 million with operating profits up 22 per cent to £68.6 million.

The group's pre-tax profits fell 33 per cent to £37.8 million, reflecting a £31.4 million eight-month interest charge compared to interest income of £4.2 million the previous year. C&C had net debt of £620 million at the end of the year, mainly due to the cost of the MBO, compared to net cash of £100 million in 1998. This cash was recouped by Allied Domecq when it sold C&C to the management group.

C&C was within weeks of going public last year before the flotation was pulled by Allied Domecq in favour of the sale to the management group, but Mr O'Brien said that floating C&C is still the preferred option as an exit mechanism for the backer of the MBO, British venture capital group BC Partners.

Mr O'Brien conceded there was still a reluctance among some institutional investors (particularly in Ireland) to support midcapitalisation stocks. He said the aim was to build C&C to an enterprise value of €1.2 billion to €1.5 billion before floating the company.

"At that size, we would get recognition from European fund managers," said Mr O'Brien, adding that C&C would need a few more sizeable acquisitions before it achieved that scale.

C&C bought the Tayto snack foods group for £68 million in mid-year, but failed in a bid to buy Vecchia Romagna brandy from Diageo when the British drinks group sold off its non-core brands. It is understood that C&C offered about £75 million for Vecchia Romagna but was outbid by Italian drinks group Montenegro.

Mr O'Brien said it was likely that other drinks brands will come on the market as other major drinks groups like Bacardi, Pernod Ricard and Brown Forman consolidate their operations to a small number of global brands. "I still see some exciting possibilities there," he said, adding that since being sold by Allied Domecq, C&C is much freer to look for acquisitions.

Although C&C carries a heavy debt burden - full-year interest charges are only 1.5 times covered by operating profits - Mr O'Brien said that funding for acquisitions would not be a problem, with BC Partners stating that it would provide additional equity if required.

"Debt is a constraint and we can't go out with an unlimited cheque book, but we have built up a lot of confidence with investors and lenders - and this is a business which throws out good cash flow and strong margins. There is a lot of money available for good projects," Mr O'Brien said. He added, however, that if and when C&C did go public, the group intended to raise funds to reduce its debt load.

The 1999 results from C&C show just how strong the group's margins are, with operating margins rising from 14.3 per cent to almost 16 per cent. All of C&C's divisions - alcohol, non-alcohol and international - contributed to the growth, with C&C's Irish sales benefiting from the relatively fine summer. Bulmers cider volumes were up 23 per cent, while the group's wines and other brands such as Ritz also performed strongly.