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It was only a couple of years ago that brewer Scottish & Newcastle left a rather “bland aftertaste”, says Lex in the FT. It was underperforming badly at the time, and suffered from its over-reliance on mature European markets.
Now it seems things are looking up for the group. With the Russian appetite for beer rapidly growing – S&N’s Russian branch showed a 22% rise in half-year profits – and successful cost-cutting in the UK, Britain’s largest brewer posted a 9% increase in pre-tax profits for the first half of the year, to £160m.
The good news for S&N is that cider, a crucial part of the company’s brands, seems to be back in fashion, and the group has reacted accordingly, extending its lead in this category, says Lex. Moreover, thanks to increased marketing expenditure, the UK business is performing well, while smaller markets China and India have also seen impressive growth. But does this mean that the share price – which has underperformed the blue chip index by 4% this year – is about to surge?
Not necessarily, says Simon Nixon on Breakingviews.com. France and western Europe in general have proven to be S&N’s trouble spots, with profits sliding 10% due to weak economic conditions there. Until these markets see some improvement, it’s hard to see any potential bidder stepping to the fore.
This means that chief executive Tony Froggatt will have to drive the business all by himself for a while yet – which will be no mean feat as the overall beer market has declined in the UK, and plans to consolidate the group’s Russian breweries have picked up opposition from shareholders. In the absence of any bid action, there’s not much that could drive the share price higher
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Heather D'Alton
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