UK: S&N optimistic after volumes boost
The UK-based brewer S&N said today that its first half performance had seen an organic growth in beer volumes of 6%, leading to a rise in profits before tax of £158m, an 8.2% increase on a comparable basis. Operating proft reached £202m up 7.4% on a comparable basis.
However, when acquisitions, disposals and the effects of the exchange rate were taken into account profits before tax were down from £217m in 2003 and operating profits fell from £299m.
Comparisons with the results for the six months to 30 June 2003 were affected by a number of acquisitions and the disposal in the managed retail side of the business. On a comparable basis, excluding the positive impact of acquisitions, the negative impact of the sale of managed retail and the impact of movements in foreign exchange rates, turnover grew by 4.2% to £2,382m and operating profit by 7.4% to £202m.
Chairman, Sir Brian Stewart said: 'This is a strong performance, with operating profit up 7% on a comparable basis and net cash flow of £129m, before funding a £200m special contribution to the pension scheme. S&N is now a well balanced business between more mature markets in Western Europe and faster growing markets in Eastern Europe and Asia. The results also reflect the strength of the management team, the changes they are making, and the growing momentum in the business.'
Chief executive, Tony Froggatt said: "S&N has made good progress over the last twelve months as measured against our key performance indicators. Organic growth in beer volumes of 6% matches the best of international brewers and we gained market share in all our key markets except Russia. Importantly this has not been at the expense of gross margin which increased across all divisions within the group."
The company said that global marketing spend was up 15%.
This seemed to benefit the UK business in particular where results showed a strong turnaround from 2003. The company's four key brands, Foster's, Kronenbourg 1664, John Smith's and Strongbow grew strongly with total volumes up 9%. There were also significant improvements in operational efficiency, including synergies from the successful integration of Bulmer, the group said.
In the international business despite weak economic conditions across Western Europe and cooler summer weather than in 2003, S&N's premium brands grew at 4%, contributing to improved margins.
At BBH beer volumes grew 13% and gross margins improved but a significant increase in spend on advertising and promotion impacted on net margins.
"This increase in marketing spend is an important investment for the future to strengthen BBH's market leadership in the region and margins should improve going forward," the company said.
Net debt at 30 June 2004 was £1.9bn compared to £4.0bn at 30 June 2003, primarily due to proceeds of £2.4bn from the sale of Managed Retail in November 2003.
"The good performance in the first half of 2004 gives us confidence that we will meet our financial and commercial objectives for the full year," S&N said in a statement.
"In the UK, as previously stated, we expect that operating profit for 2004 will be slightly ahead of the comparable performance for 2003. This is despite soft trading in July following large off trade promotions in June related to Euro 2004 and despite the small reduction in operating profit arising from the disposal of £76m of trade loans to HBOS. In addition, we anticipate an increase in marketing spend over the year equal to 1.5% points of net sales."
But S&N said that in Western Europe comparatives with 2003 are more difficult for the second half of the year and trading in July has been weak due to disappointing weather conditions.
"However, we remain confident that across France, Greater Europe and the USA our premium brands will continue to grow contributing to an increase in operating profit for the year on a comparable basis," it added.
In Eastern Europe S&N said it remained optimistic about the prospects for BBH's markets and brands.
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