The booming Irish economy, more people in work and higher disposable income were the main factors behind another excellent set of results at Cantrell & Cochrane, the drinks group owned jointly by Allied Domecq and Guinness.
Profits for the year surged 21 per cent to £52.3 million with operating margins improving substantially. Sales were up 7 per cent to £365.9 million. The improvement in operating margins was the result of lower raw material price and productivity gains for recent capital investment projects.
Further growth is expected in the current year. "The positive outlook is expected to continue for 1998," according to the chief executive, Mr Tony O'Brien.
Mr O'Brien said that so far, the bulk of the additional disposable income had gone on major purchases such as cars, white goods and other electrical product.
"We would expect to get a bigger slice of that disposable income next year, we should also benefit from events like the Tour de France and the World Cup."
C&C's huge cash-flow generation - a net £27 million last year - means the group has net cash of £65 million at its August 1997 year-end. This clearly gives the group huge resources to make acquisitions with the focus outside Ireland. Any acquisition is likely to be substantial and to cost not less than £50 million.
Mr O'Brien said, however, that so far the search for acquisitions has been fruitless "despite some near misses". C&C was an under-bidder in the £45 million sale of a drinks company sold by the Czech government. But he said C&C will continue to look at drinks privatisations in eastern Europe and might also consider investing in the British cider industry.
The surge in the domestic business was attributed to the strength of the economy and greater purchasing power, but the Irish business also benefited from what Mr O'Brien describes as "a dynamic east cost-led tourist season". Export markets were mixed with modest growth in the US and subdued activity in Europe.
Overall, however, there was little change on the way sales split between Ireland, which accounted for 56 per cent, and overseas 44 per cent.
But the growing presence of the British multiples in both the Republic and Northern Ireland has had an impact on margins. "We've seen only the beginning of that tightening, it's going to get worse," he said.
The Bulmers cider brand had growth of 20 per cent despite new entrants to the market, while Ritz benefited from a product revamp. The alcopops sector has, however, collapsed, says Mr O'Brien, as a result of poor publicity and alcopops' association with underage drinking. C&C manufactures the Corky's alcopop brand. Consumption of alcopops has halved, said Mr O'Brien, and Corky's has suffered accordingly.
Non-alcoholic products also performed well, with Ballygowan benefiting from the favourable exchange rate with sterling. Other soft drink brands - Club, Cidona and TK - also enhanced their market position as did the Schweppes and Club mixer brands.
Wine consumption - led by new world wines - continued to record double-digit growth, while Tullamore Dew benefited from the growth of Irish pubs abroad and the growing reputation of "Irishness". Tullamore Dew had "a splendid year", said Mr O'Brien.
The Carolans cream liqueur brand slipped in Germany while the Italian liqueur brands also suffered from the economic weakness in Spain and South America.
C&C's results show that it paid its two main shareholders £7 million in dividends last year, but still retained profits of almost £36 million.
The net cash position of £65 million compares with just £50 million in the previous year.
