Purchase: C&C Group (CCR)
It’s still in the early days, but there are clear signs of recovery in the C&C group, writes Michael Fahe.
Tennent’s Lager and Magners Cider brand owners suffer from issues such as failed upgrades and accounting errors, and have managed to raise their operating profit margin to 4.6%.
This improvement is attributed to a shift in distribution sectors that supply pub chains such as Stonegate and JD Wetherspoon (JDW). We lost customers due to low service levels, but have been handed over the past 12 months, doubling our sales margin by 2.3%. Management believes that further streamlining market share profits and operations will boost this by more than 3.5%.
At Margen brand Hightal Drinkside, C&C recently regained full control of the British Magners brand from Budweiser. Management argued that although its performance has been weak in recent years, a growing focus (including new advertising campaigns) should drive commercial benefits.
Free cash flow fell by a third to 43.6 million euros (£36.6 million), but was given exceptional costs of over 25 million and buybacks of over 3,000, but management has reiterated its goal of generating operating profit of 100 million and at least 75 million euros of free cash flow by 2027.
Based on this, Coast Capital Analyst Greg Johnson expects a meaningful acceleration in earnings per share to 19% in 2027, from 8% in 2027.
This requires the belief that the recovery will continue, but the stock price with a 15x consensus revenue looks like a reasonable price to pay given C&C’s improved outlook.
Purchase: Home pet (pet)
It’s hard to say whether the effects of the Covid-era pet boom are still exhausting. The continuous lockdowns have caused a surge in pet ownership as people sought the comfort of our furry companions. However, it is difficult to identify the remaining impacts in the corners of the consumer market.
The pets at home were beneficiaries of the phenomenon, as indicated by a 23% increase in group revenues from 2021 to 2023. Since then things have settled down and the top line has been static until the end of 2025.
The group offers a “one-stop shop” service to pet owners. Also described as “a true pet care platform” by CEO Lyssa McGowan. The explanation may seem slightly emotionally charged, but the desire to be packed into pink really supports the business model. People have stopped buying pets to drive away loneliness related to the pandemic, but those new participants will need veterinary care for the next decade or so during lockdown.
McGowan highlights “another year of veterinary business growth,” as evidenced by a 23.3% increase in underlying profits rose to £75.9 million. In contrast, on the retail side of businesses where demand is likely to be price resilient, 16.6% fell to £72.9 million. And it’s worth pointing out that relationships with your veterinarian tend to last as long as your family’s GP.
The physical presence of the group has evolved over time and is expanding into smaller, more localized forms, including a network of veterinary practices. It also developed an increasingly successful membership scheme while overhauling digital infrastructure and simplifying distribution networks. All of this activity sucks in capital, but these investments are now significantly completed, so the return on revenue should be more clear. Capital investments for fiscal 2026 are being marketed to “normalization levels below £50 million.”
Ending after the period, profits are tracked in line with guidance, but operational costs are expected to be mitigated. The consumer market remains restrained, providing a substantial range of underlying profits of £115 million £125 million. Cash flow provides encouragement, with very little book liability (Ex-IFRS 16) and Writedowns does not expect a smooth transition to net profit. Still, the stocks are well below the peer average at the price-to-book ratio of 1. Therefore, a 5% forward dividend yield still requires a “buy” call.
Hold: British Land (BLND)
British lands are swimming against the tide, at least in terms of perception of the UK commercial real estate market, writes Mark Robinson. Orthodox views combine work from working from home with the merciless rise of online retail, perhaps to pull out rugs forever.
However, management has the view that by gaining paradoxical status and investing in an unclear segment of the London real estate market, the group can generate good returns. Simon Carter, chief executive of London-centric landlords, said it was “returning to the level before it returned to the weekly medium-term occupancy,” which is intensifying competition for the “multi-channel” space in the group’s retail parks.
This probably makes sense given the lack of construction activities in the wake of the pandemic and the screams of premium office spaces highlighted by British land peers. However, if a supply-side shortage boosts rental values, it is not immediately clear in the group’s preliminary figures. Naturally, progress was progressive, not dramatic.
The previous year’s 28.5pa shares had flat underlying revenues, but the return on assets totaled 6.9% of the property due to a high valuation and an encouraged rise in estimated rental value. However, returns were constrained to 17.5% due to an increase in cost ratio of 110 basis points. Nevertheless, after years of valuation decline due to rising interest rates, the predicted boost for rental rolls is warmly welcome.
Assuming rents actually meet the demand for renewed investors across the portfolio, the recovery is still in the reborn category. So for now, we’ll dry the powder despite an attractive forward yield of 6% and a 30% discount on net worth.