SA Brain hit by 'perfect storm'

The 'perfect storm' of smoking ban, poor weather and consumer uncertainty has combined to hit annual turnover and profits at Welsh brewer SA Brain.

Turnover in the year to September 30, 2008 fell more than three per cent to £117.1m, although operating profits edged up 0.5 percentage points to £8.9m.

The brewer said actions taken to improve the cost base had resulted in net operating expenses falling 12 per cent to £14m.

Pre-tax profits were down 13 per cent to £8.7m.

Noting the backdrop against which Brains had to operate - smoking ban, poor weather, competitive market and waning consumer confidence - chief executive Scott Waddington said the group was satisfied with the results.

"The investment that we have continued to make in our brand, pubs and people has ensured that we have continued to outperform the market in most areas of the business," he added.

Brains' managed house estate saw overall sales growth three per cent, with like-for-like sales up by 1.1 per cent. However since the smoking ban started in April this latter measure was showing a decline of 1.5 per cent.

Trading patterns post smoking ban have proven difficult to assess, said Waddington, since the weather has played such a factor since its introduction.

However the ban had boosted food sales, up by more than eight per cent on the previous year. At the beginning of the year food sales accounted for 26 per cent of turnover, rising to 29 per cent since the ban's introduction.

The brewer's tenanted and leased division provided an increased contribution of more than 16 per cent, driven largely by the continued transfer of smaller managed houses into this estate.

Contribution from the free trade business was 5 per cent down on the previous year, the group said.

However own ale brands performed ahead of the declining market in volume terms "and therefore Brains' market position continues to improve", it added.

Volumes of Brains' own ales with national sales customers grew by 1 per cent, with Brains Smooth up 12.1 per cent.

Brains has meanwhile recruited an account manager to manage the take-home sales business.

Waddington said the brewer remained cautious about consumer confidence, regulatory cost pressures and the short term impact of the smoking ban but he remained confident Brains would deliver long term value growth for its shareholders.

"Despite the pressures that the current market conditions present, we remain committed to our long term strategy.

"Having recently celebrated 125 years, we are looking forward to another 125 years in business," he said.