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Real-Time news about Cains Beer (London Stock Exchange): 0 recent articles
|dotto: From the Liverpool Daily Post
Toxteth brewer aims to buy more pubs
Jun 25 2007 by Bill Gleeson, Liverpool Daily Post
STOCK Market-quoted Cains Beer Company wants to expand its pubs estate through acquisitions.
The Toxteth brewer's managing director told the Daily Post there would be a pause for consolidation over the next two years following its recent flotation, but the company would be looking to expand the number of pubs it owns thereafter.
Speaking during a podcast interview with Daily Post business editor Bill Gleeson, Cains co-owner Sudarghara Dusanj said he hoped to take the Liverpool brewed premium beers across the Pennines to Yorkshire. Mr Dusanj said: "We want to consolidate in the next couple of years. Once we have done that, we would be very interested in expanding the estate. Its a key part of our strategy to own more pubs.
"The North is where we'd like to stick to. Quite happy to take it up to Leeds. The North West and bor- dering slightly out is the geograph- ic area we are keen to expand."
The podcast interview can be heard in full at thebusinessweek.co.uk
Cains floated on the Alternative Investment Market two weeks ago by reversing into Preston-based pub chain Honeycombe Leisure. Honeycombe owned an estate of 100 pubs, whereas Cains brews beer sold through supermarket labels and for its own premium range of cask and bottle beers. Cains owners, Sudughara and his brother Ajmail ended up with two thirds of the merged business. Some shares were also placed with City institutions.
Mr Sudughara said he had no regrets about the price at which his company floated onto the Alternative Investment Market two weeks, despite the fact the share price has risen five fold since.
He said: "It was difficult to pitch where to start. Cains is only really breaking even. It was losing £2m a year. Its a turnaround and Honeycombe is also a turnaround.
"It's a long-term play."
He said the key was to build the business and improve the margins.
"80% of Cains business relies on supermarket and canning contracts. The margins are paper thin. It's a tough industry.
"The thing now is to build on the brand, the premium lagers and other bottled beers."|
|tiredoldbroker: Tadtech, obviously it takes two views to make a market, and I'm happy to chew this one over. I don't believe there is a predator waiting in the wings, because (a) Honeycombe's pubs were up for sale for a long time and didn't attract a buyer (and could have been had much cheaper then than now), and (b) I don't believe the Dusanj brothers would waste money on reversing Cains into HCL if they'd had a cash buyer lined up, and (c) a hostile offer won't work as the board hold over 50%.
As far as the share price goes, my reading of the numbers doesn't support this level, and I'll explain why. All the numbers are in the merger document at http://www.honeycombe.co.uk/pdfs/AcquisitionofCains.pdf and are thus the company's own.
In the year to 30.4.06 HCL made a loss at the operating level (before interest, exceptional charges and tax) of £121K; in the first half of this year, stripping out fixed asset items, they roughly broke even. Their cost of sales (i.e. purchases of all stock for sale, not just beer but spirits, food etc) was under £26m and will be lower this time. Their pub estate was not in good shape, after years of under-investment. In the year to 31.10.06, Cains made a profit at the operating level of £386K.
I do believe that with new management, they can earn more from the old HCL estate. I'd also suggest that a percentage of HCL pub beer sales can be supplied from Cain's brewing division, which will help margins there. But the problem is, I think that the better profits will largely go on servicing the £35m mountain of debt; even at 7%, the interest bill would be £2.45m a year. As the old HCL pub estate really needs money spending on it, I don't see immediate scope to cut debt, and it may even be that as Cains total sales last year were just £24m, scaling up to supply the HCL estate may require further capital expenditure, on kegs and lorries if not new brewery equipment.
So my conclusion is that the combined CBC business is probably stronger than either Cains or Honeycombe were as separate entities; but that the likely improvement in trading is simply not enough to support all the debt and a market value at 28p of over £42m. I don't think I'm simply looking back at historic trading, I really am trying to base my valuation on what CBC might manage in the future, and it isn't enough. I can see that the bank was very pleased to see HCL secure a deal which gave the bank more security, and better cover on the interest bill, but I think it may be a long haul to produce value for anyone buying at this level. The problem is that the £35m debt won't go away, and the shares are like a highly geared "stub" on whatever the residual value may be, after allowing for the debt.|
|bigbobjoylove: nice statement that 'CAINS has become 10 times bigger yet the share price hasn't'.
Any targets? More of a takeover play than anything else for me. SCTN were once rumoured to want CAINS for their ales. Would be a great aquisition for a brewer now given the 110 pubs they now have.
re 100000 buyer, looks like institutions getting aboard, suppose to be presento analysts the next few weeks, hopefully shares will be miles higher than this by then.|
Cains Beer share price data is direct from the London Stock Exchange