Smoke ban to hit Scottish & Newcastle profits by £10m

Scottish & Newcastle (S&N) has said it expects the forthcoming English and Welsh smoking bans to hit its profits to the tune of around £10m.

Announcing its results for the 12 months to December 31 2006, S&N said it expected the on-trade sector in the UK to decline by around five per cent in 2007.

Around half this fall would be as a direct result of the smoking ban, and would be only partly offset by increases in off-trade volumes, the group said.

"The implied net impact on profit of the smoking ban is around £10m for 2007," it added.

The group also revealed that in a drive to improve efficiency and reduce costs it was to seek savings throughout its wholly owned businesses to the tune of £50m, split roughly equally between its UK and international operations, over three years.

S&N's group turnover for 2006 rose by a comparable seven per cent to £4,155m, while pre-tax profits rose 13.9 per cent to £452m.

UK revenues grew 6.7 per cent to £1,864m, with operating profits up 1.5 per cent to £206m.

Its UK branded beer and cider volumes rose 3.8 per cent, with net sales growth up 4.5 per cent.

However the group's domestic operation saw margins dip from 11.6 per cent to 11.1 per cent, a situation exacerbated by a fire at the distribution centre of its wholesaling business Waverley TBS in the first half, a rise in energy costs throughout the year and a shift from the on-trade to the off-trade during the World Cup.

S&N also sold two tranches of its trade loan book, which reduced operating profit by £3m over the year.

Meanwhile the group's Baltic Beverage Holdings (BBH) venture, jointly run with Carlsberg, saw revenues rise 23.1 per cent to £724m, and operating profits leap 42.9 per cent to £160m.

BBH's performance in Russia was helped by a 10 per cent hike in the country's beer market in 2006, with its own volumes rising by 11 per cent.