S&N looks overseas to bolster growth

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The Independent Online
SCOTTISH & NEWCASTLE, the UK's biggest brewer, yesterday said it would target its overseas wine and spirits businesses for growth as it reported first-half profits up 7 per cent.

Brian Stewart, Scottish & Newcastle's chief executive, said: "You will see more development of our businesses outside the UK... We will look for bolt-on acquisitions in mainland Europe."

Currently, about 90 per cent of the group's revenues are generated in the UK, but some of its brands, such as Foster's and Newcastle Brown Ale, are already performing well in continental Europe and the United States.

Mr Stewart said S&N also plans to expand its UK wine and spirits division to take advantage of the company's well-established distribution network.

The group posted pre-tax, pre-exceptional profits of pounds 222.3m for the 26 weeks to 31 October on turnover up 2 per cent at pounds 1.7bn.

Like-for-like sales at the group's UK managed pubs, which include the Rat & Parrot chain, were down 2.8 per cent in the first half.

But the company said they were improving in November and December, and were now running "nearly positive". Scottish Courage, the group's brewing division, saw volumes up 0.3 per cent.

Mr Stewart sought to dampen long-term speculation that the company was grooming its Center Parcs holiday lodges chain for disposal.

He said the group was committed to its 13 holiday villages and that, after a period of underperformance, the company's pounds 36m upgrade of the chain in Germany, Holland and Belgium was paying off with higher occupancy rates.

"Center Parcs is very much part of the group and we are looking to optimise shareholder value by upping its value," he said.

The sites in the UK, Germany, France and the Benelux countries showed first-half turnover up 7.6 per cent and operating profit up 8.6 per cent.

Mr Stewart said the integration of the 765 Greenalls pubs, which S&N acquired earlier this month for pounds 1.14bn, was progressing well and would accelerate the group's future growth.

S&N plans to develop Greenall's Squares restaurant chain but will convert some of the other sites to its own brands.

He said there was "plenty of interest" in the 700 to 800 S&N outlets which are to be sold as part of the deal in order to meet UK regulatory requirements. The disposals are expected to raise about pounds 350m.

The company invested pounds 123m in its retail business during the first half of the year and opened 26 new outlets. Another 38 openings are planned for the rest of the year.

The group spent a further pounds 41m on building its beer brands in the period, including pounds 5m to cut costs and streamline its bottling and canning facilities.

S&N shares yesterday closed up 3.5p at 456.5p. Derek Wilkinson, the group's finance director said: "It wasn't the most exciting response to what we consider to be a pretty good set of results."

The stock has underperformed the market by 45 per cent over the past year.