BELHAVEN Brewery Group continued to play to its strengths as the Dunbar, East Lothian-based company increased full-year pre-tax profits by 20.3% to #5.03m - the result of a combination of both organic growth and acquisition which helped push turnover ahead by 14.9% to #38.3m.

Chairman Hamish Swan said that the brewing industry will this year see the closure of Carlsberg-Tetley's Alloa brewery, after which Belhaven will become Scotland's third-largest composite brewer.

He added that this would underline to the licensed trade that the company could offer a distinct alternative to the national brewers who have presence north of the Border.

Bass has about 35% of the market, Scottish & Newcastle 29% and Carlsberg-Tetley 10 %, which compares with the 7% of both Belhaven and Guinness.

Analysts believe that Carlsberg-Tetley is on the retreat in Scotland and Belhaven will be the first to take advantage of the situation.

The pub estate grew from 69 to 77 pubs and has grown to 83 since the year-end. The managed house portfolio, which naturally lends itself to the higher turnover units, is receiving a great deal of attention. The target is to increase the pub estate to about 100 units by the end of 1999 and there would seem to be little difficulty ahead in achieving that objective.

Chief executive Stuart Ross said yesterday that Belhaven had increased free trade loans by over a quarter to #7.73m as the number of accounts expanded during the year to 1087 customers. Almost 300 of these carry pre-emption rights which allow Belhaven the first opportunity to buy a property and where it will have a better perception of the trading potential in its own hands.

There had been a 6.4% rise in drinks sales although most of that had come from the factored brands bought in - chiefly the Bass lagers such as Tennent's.

But Belhaven has also been putting more marketing behind its Belhaven Best which increased its volume by 4.7% despite strong competition. The brew sold 29,400 barrels of 288 pints in the year to March, and seems to be taking share away from Bass-owned Caffrey's.

It is outperforming the cask market which, overall, declined by 15%.

The pubs raised their profits contribution by 22.9% to #3.19m, although margins fell due to the refurbishment programme which resulted in 10 temporary closures.

Recent additions have included Molly Malone's in Glasgow while there will be significant expenditure in upgrading the Green Tree in Edinburgh and the Courtyard and Canteen pubs in Stirling.

Despite an on-going capital expenditure programme of around #5.5m annually, the balance sheet could fund an acquisition of #10m.

The drinks side saw a 24.8% rise in profitability, or three times the rate of turnover to #2.46m.

Sales should increase this year as the new distribution depot in Aberdeen begins to give the company effective coverage of the country, along with the other distribution centres at Dunbar and Dumfries.

Since the shares were floated in 1996 at 180p they have been as low as 140p, resulting in part from selling last year by Scottish Amicable and CinVen. They have now recovered to 222.5p, for a market capitalisation of #45m. The City is expecting pre-tax profits of about #5.7m for the current year, which would leave the shares trading at 11 times likely earnings.

Nigel Parson at Panmure Gordon says that Belhaven is a sensibly-run business and will show about twice average market growth and the stock is still cheap.

The dividend total has been raised by 10.7% to 6.2p with a 4.1p final.

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