Investment Column: S&N solid despite leisure slump

Whatever happened to the leisure boom? A year ago pundits were predicting that a combination of a strong economy and building society windfalls would lead to a golden era for the industry, with more punters splashing out on a game of bingo or a visit to their local holiday camp.

The reality has been rather different. Customers have preferred to go on exotic holidays abroad.

Huge investment in the industry has also caused intense competition for the leisure pound and hit margins. Now the brewers are desperately slashing investment and trying to sell off businesses.

Scottish & Newcastle highlighted the industry's problems yesterday when it announced that profits at its leisure division had slumped to pounds 3.2m (pounds 6.2m).

Its Pontin's holiday camps are still struggling and S&N's Centre Parcs concept continues to prove difficult to sell on the Continent.

Chances are Pontin's will soon be sold and Centre Parcs should come right eventually, although not for the next six months at least.

However, S&N's leisure woes should not detract from what was overall a great set of results.

The group still managed to beat analysts' forecasts by announcing a 15 per cent rise in pre-tax profits to pounds 225m, thanks to a sterling performance from its pub estate and beer business.

In a beer market where brands are becoming increasingly important, S&N has one of the best portfolios in the business. And in a pub market which is quickly dividing between winners and losers, S&N is emerging as a winner.

The testament to its success is the fact that the company is managing to maintain returns of 28 per cent from its investment in its managed estate.

Analysts forecast full-year profits of around pounds 430m, putting the shares, up 19.5p to 714.5p on the good results yesterday, on a prospective price- earnings ratio of 13. On these figures, they are good value.