Investor/An insider's guide to the market: C&C Group is a newcomer to the Irish stock market, having had its initial public offering in May 2004.

After a shaky start the shares have since performed well and are currently trading towards the top end of their one-year price range of 222c to 352c. At their current price of 325c the company is capitalised at just over 1 billion which puts into the same league as Fyffes (0.8 billion), Glanbia (0.8 billion), Jurys Doyle (0.9 billion), IAWS (€1.5 billion) and DCC (€1.3 billion).

C&C is one of the largest manufacturers, marketers and distributors of branded alcoholic and non-alcoholic beverages in Ireland.

Its most important brand is Bulmers cider, which has performed very well over the past year. Despite the smoking ban sales volumes of Bulmers were maintained over the past year in a declining overall market.

In Scotland C&C's cider brand is Magners and due to a big marketing push sales grew sharply over the past year.

Success in Scotland has prompted management to accelerate the planned roll out the Magners brand in Great Britain over a three-year period.

Magners was launched in the London region in March and if the Great Britain roll-out is successful it will be the key driver of growth for C&C over the medium-term.

However, this accelerated roll-out of Magners in Great Britain will involve high marketing costs that will act to depress growth in earnings per share (EPS) in the current year.

Another factor that may depress earnings growth in the coming year is the proposed take-over of Allied Domecq by Pernod Ricard.

C&C has an international distribution contract with Allied, which expires in 2006. The implications of the deal for C&C is negative for its Irish distribution business, which will lose distribution rights for brands such as Tia Maria and Malibu.

However, another potential bidder has emerged in the form of a consortium led by Constellation Brands, which may make a formal offer that usurps the Pernod Ricard bid. It is therefore still possible that C&C may not suffer from the eventual take-out of Allied Domecq, depending on who is the successful suitor.

In any event the value of the distribution rights with Allied Domecq, although significant, are not particularly large and would result in a reduction of approximately 2 million in operating profits if they were lost.

C&C's financial year end is February and it recently announced its results for the last financial year. EPS grew to 26.4 cents, a rise of 25 per cent on the previous year.

Bulmers and Magners sales were the key drivers of growth, with sales up by 9.8 per cent whilst distribution sales grew by 5.2 per cent. Soft drinks and snacks suffered declines in sales of 1.3 per cent with a consequent fall of 8.7 per cent in operating profits from these products.

This bounce in earnings is not expected to be repeated in 2005/2006 and most brokers are forecasting flat earnings for the group over the next 12-18 months. Higher marketing costs associated with the rapid roll-out of Magners in Britain are the main reason for this short-term flat earnings outlook.

Since the results announcement there have also been some significant changes in C&C's shareholding structure. B&C Partners, the venture capital group, together with other co-shareholders, recently sold 38 million shares for 125 million.

At the time of its flotation last May B&C Partners sold part of its then shareholding and agreed to retain its remaining stake until November 2004.

This recent reduction in its shareholding should improve the liquidity of the company's shares and further reduces any perceived overhang in the shares that may be acting to depress the price.

At its current price the shares offer a prospective dividend yield of 4 per cent and given the capacity of the company to generate strong cash flows, shareholders can look forward to steady and sustained growth in the dividend over the long-term. At a price-earnings ratio of 12.5 the shares are reasonably priced compared with the overall Irish market and compared with other companies in the drinks and food sectors of the Irish and overseas markets.

The lack of near-term growth in EPS will probably limit the upside in the share price over the short term.

Nevertheless, Investor would view this as an opportunity to invest and believes that there is substantial medium-term upside in the shares if the roll-out of the Magners cider brand in Great Britain is successful.