COMMENT: S&N pubs still cloud future performance
Yesterday in an AGM statement the UK brewer Scottish & Newcastle said it was confident of meeting its financial objectives for the year, despite what it called "variable" conditions in its major markets.
An S&N trading statement indicates that it has gained market share in all of its beer operations. In the UK (29% of group EBIT), its top five brands in the UK grew by 3% in the year to date. However, this compares with data released from the UK government yesterday that shows total beer volumes up 4.6% on a moving annual total basis and 4.8% on a quarter on quarter basis. "This suggests that the S&N are not necessarily out-performing the beer market," said Stuart Price of equity analyst WestLB Panmure in a research note.
However, there is evidence to suggest that they are out-performing some of their immediate peers. Data from market researchers AC Nielsen shows that S&N's performance in the UK off-trade (Nielsen estimates that the off-trade represents 16% of the total beer market value) has out-performed its peers. In the year ending June 2002, Fosters was up 19.7% in value terms versus 14.7% for Kronenbourg. Coors' Carling brand was up 10.4% and Interbrew's Stella was up 9.4%.
However Price remained concerned about the lack of news on a disposal of the pubs business. He said: "The weekend press was replete with comments that S&N would announce the sale/partial sale of its pub operations. The statement indicates that management intend to release a substantial amount of capital currently held as freehold property.
"We estimate that £2.1bn could be released if S&N retail were merged with the SXC estate - management is unwilling to reconsider doing this deal. The implication from the AGM statement is that management is in little hurry to crystallise the value or consider anything other than a property deal. Meanwhile, 2004 estimates continue to tumble on the back of high interest charges - we have moved PBET from £659m to £616m," Price said.
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