UK: S&N to take £15m charge in H2
S&N also said Scottish Courage was unlikely to achieve any significant operating profit growth in the 2003 calendar year. The group's UK beer operations contributed £108m to total group operating profits of £377.50m in the six months to October 27.
S&N stated that productivity at its new regional distribution centres was substantially short of expectations and that it was having to keep its old network operating, resulting in "double running" costs. "Scottish Courage is taking strong management actions to resolve this issue," the company said. "However, it is expected that the business will incur additional costs in the supply chain for the remainder of the calendar year." The company added that it expected the transition to the new supply network to be largely complete from 2004.
Beverage analyst with WestLB Panmure Stuart Price said: "S&N's trading statement does not read well. "Just when S&N could not afford to come out with a threat to performance, it delivered one… Our target price (470p) is under review, but we see little reason why S&N should trade above 420p in the short-term. We contend that the 2003/04 dividend is under threat from the extra costs and the sale of the pubs (no news on that) - in order to meet the dividend expectations, the pay-out ratio has to grow to 80%. Furthermore, we believe that S&N cannot be discounted from bidding (using equity) for BBAG, and there is also significant reinvestment risk. We continue to believe that S&N should be bought by Anheuser Busch - and quickly!"
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