Scottish & Newcastle, Britain’s biggest brewer, has this morning said that the smoking ban in England and the poor summer weather wiped almost £30m from UK operating profits.
Reporting full-year results it said that UK margins fell to 11.4% in 2007 from 12.4% in 2006, with operating profits down £18m to £213m.
Of that reduction, £9m related to higher input costs, £10m was the net impact of the smoking ban, and £19m mainly related to lower-than-expected volumes of the key summer trading period and associated negative operating leverage. This reduction of £38m was off-set by cost savings of £20m.
It said that in the past 12 months it had grown its share of a declining UK beer market.
The company, which makes Foster’s, Kronenbourg 1664 and John Smith’s, said that against a total beer and cider market that was down 2.0%, its branded volume was up 0.1%.
The group, which has approved an £10bn takeover proposal by Carlsberg and Heineken, said that the UK beer market was down 3.9%. The on-trade, which experienced the twin challenges of unprecedented poor summer weather and the smoking ban, was down 6.5%.
Against this backdrop it had grown overall market share by 0.2% to 26.2%. It said that it had held its position in the on-trade and grown 0.6% in the off-trade.
UK cider market volumes increased 6.8%. S&N’s branded cider portfolio enjoyed an outstanding year with volumes up 15.1%.
John Dunsmore, chief executive, said: “In the face of substantial challenges in terms of unprecedented bad summer weather, the UK smoking ban and the distraction of the consortium approach, it is very encouraging that S&N’s outstanding portfolio of brands and leading market positions has still delivered revenue growth of 7.9% and operating profit growth of 5.7%.”
It confirmed the closure of a bottling facility at its Reading brewery, in favour of a production and packaging agreement with Coors UK. In addition, the company comfirmed its intention to close the Reading brewery altogether by early 2010. It said that given the over-capacity in the UK brewing sector it concluded that closure was the most viable option. It said operations would transfer to its other sites at Dunston, Manchester and Tadcaster.
The group is also to enter a joint venture with Q Group to construct a new cider mill in Herefordshire, creating an additional one million hectolitres of capacity.
Overall, pre-tax profits in the 12 months to 31 December, 2007, were flat at £444m on sales up 7.9% to £4.15bn.
