Scottish & Newcastle profits cheer

FOSTER'S and Kronenbourg brewer Scottish & Newcastle today toasted a solid set of full-year results following the turnaround of its British and Russian operations.

It was burned by a cost-reduction campaign at its UK distribution operations in 2003 and was accused of taking its eye off the ball in the market leading Baltika division in Russia.

But both businesses were today reported as being back on a strong growth track following close management attention. Sales volumes of Foster's, Kronenbourg, John Smith's and Strongbow were up 4.5% in the UK, driving operating profits up 11%.

'We had some difficulties but we have got to grips with the business,' said chief executive Tony Froggatt.

Performance in France was weak, where beer volumes declined by 4.9% following poor summer weather. However, Newcastle Brown Ale continued to prove popular in the US as the product recorded its tenth successive year of double digit sales growth - up 10.5%.

Overall group pre-tax profits were £373m, up 11% on the previous year's £336m on turnover of £4.99bn against £4.91bn a year earlier.

Broker UBS reiterated its 'neutral' stance on the shares with its price target increased by 5p to 450p. In a note to clients, it said S&N reported earnings per share of 30.2p, up 12.7% on a comparable basis, and 2% ahead of its own estimate, reflecting better margins in both the UK and international operations.

It noted the dividend of 20.6p was 2% up year-on-year. As a result, UBS has upgraded its earnings per share forecast by 2% for 2005-2006 to reflect the the better than expected margins.