Cider sales boost S&N but poor World Cup figures disappoint

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Booming cider sales have helped boost half-year profits at Scottish & Newcastle, but shares in Britain's biggest brewer fell yesterday because the City expected it to do better during the World Cup amid sizzling temperatures.

Tony Froggatt, the chief executive, said: "Across Europe we had one good hot month - the prior five months the weather was pretty ordinary. June was the biggest month for us but you have to put it into perspective." He added that just like Euro 2004, "outside the UK the World Cup did not have a great impact".

The company admitted its profit margins in Britain slipped as the hot weather encouraged people to buy large packs of beer from supermarkets and drink away from pubs. John Dunsmure, who heads the UK operations, said: "You would describe this World Cup as the barbecue World Cup." He said the football boosted the overall UK beer and cider market by 2 per cent in the first half.

However, overall beer volumes sold in pubs and bars were down 2.7 per cent while beer sold through shops rose 9 per cent in the first half. Mr Dunsmure guessed that on-trade volumes were up only 1 per cent during the month of the World Cup, while the off-trade notched up a 20 per cent increase.

S&N, whose beer brands include John Smith's, Kronenbourg, Foster's and Baltika, said it had gained market share in all channels - pubs and supermarkets. But Simon Hales at JP Morgan said: "Against a backdrop of the World Cup and great summer weather, S&N should be doing better, in our opinion."

S&N has made a promising start to the second half as the heatwave continued into July and August, which should prevent the usual post-World Cup hangover, it said.

Mr Froggatt highlighted the UK's fresh appetite for cider, spurred by its rebranding as a cool summer drink. S&N is trying to tap into that demand - which is largely driven by a big advertising campaign by its Irish rival C&C for Magners - by launching three new cider products, Strongbow Sirrus, Bulmers Original and Jacques. Sales of Strongbow, the world's biggest cider brand, have risen 40 per cent in the past couple of years. Mr Froggatt denied the surge was a passing fad. "We believe it's sustainable," he said.

Disappointment about the UK, where profits grew only 3 per cent, drove S&N's stock down 2.5 per cent to 519p, making it the fourth-worst performer in the FTSE 100.

Group profits before tax rose 12 per cent to £187m in the six months to 30 June, lifted by a strong performance from Russia where S&N has a 50-50 joint venture with Denmark's Carlsberg to brew Baltika. Baltic Beverages Holdings turned in a 30 per cent rise in profits. Volumes of S&N's branded beer and cider rose 4.8 per cent, but sales were down in France and Belgium.