S&N attacks industry for over-investment in pubs

Related tags Annual pre-tax profits

Scottish & Newcastle (S&N) is spending less on its pubs, claiming that over-investment is to blame for poor profits in the pub industry.It...

Scottish & Newcastle (S&N) is spending less on its pubs, claiming that over-investment is to blame for poor profits in the pub industry.

It spent £200m on its managed and tenanted estates in the year to April 29, down from the previous year's figure of £242m.

Of this, a record amount of £75m was channelled into developing its brands, which include Chef & Brewer, John Barras, T&J Bernard and Bar 38.

Chief executive Brian Stewart said: "We believe that significant over-investment by all major pub owners in the late 1990s has contributed to profit performance being below expectations."

Over the year, turnover in its managed estate rose by 17 per cent to £1.256bn and operating profit by four per cent to £144.9m.

However, pub disposals hit the results for S&N Pub Enterprises, where turnover dropped by 20.7 per cent to £31.1m and operating profit fell 34 per cent to £17.3m.

Deals included the sale of 447 tenancies to the Royal Bank of Scotland, which meant that it owned only 391 tenancies by the end of April this year.

However, it continues to run another 615 free-of-tie tenancies on behalf of the Royal Bank of Scotland. It is also transferring 180 pubs from its managed estate to tenancy agreements.

This year's results will be affected by further restructuring, which includes the proposed sale of 646 managed houses to Enterprise Inns and Noble House Leisure.

S&N said its UK beer business, which produces John Smith's, Kronenbourg 1664, Beck's, Miller and Foster's, grew market share, profits and margins.

Mr Stewart said: "In a UK beer market that declined by 2.6 per cent owing to extremely adverse weather conditions and the impact of the foot-and-mouth crisis, our own volumes were down by only 0.6 per cent."

The group reported a 4.6 per cent rise in underlying profits for the year and said it was in a strong position to deliver future growth.

Pre-tax profits before exceptionals for the year were £427.5m on turnover up 22 per cent at £4.35bn.

The pre-tax figure was in line with analysts' expectations of underlying annual pre-tax profits of £420m to £430m.

S&N shares have outperformed the FTSE All-Share index by around 16 per cent in the last 12 months as they have recovered from a low of around 341p in February 2000.

But they have underperformed other companies in the brewing sector by nearly 20 per cent, slipping this morning from 550p to 547p.

S&N suffered a series of exceptional charges of £683m from restructuring the group, including the sale of the pubs, Center Parcs and Pontin's.

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