The UK beer and leisure group Scottish & Newcastle has posted a 3.5% rise in profits, saying it is on its way to becoming the largest brewer in Europe.

Scottish & Newcastle said pre-tax profits for the 12 months to the end of April 2002 came in at �442.3m (�675.7m).

S&N owns about 1,400 pubs in the UK, and also brews Kronenbourg, John Smith's and Foster's beers.

Growth in the company's UK beer sales was unspectacular, up only 0.3%, although S&N said a drop in its trade sales was offset by stronger demand at off licences.

Looking east

"This year has seen a transformation in the shape and character of Scottish & Newcastle," S&N chairman Brian Stewart said.

"Operationally, all three divisions of the group have contributed to our strong growth."

S&N said recent acquisitions were on track to make it Europe's biggest brewer in terms of operating profits.

In February, the group bought Finnish drinks firm Hartwall as part of a plan to move into Eastern Europe and Russia.

However, the company faces stiff global competition following a wave of major brewing mergers, most recently that between South African Breweries and Miller of the US.

Pub sell-off plans

Last year S&N said it would cut 1,300 jobs over four years at its Scottish Courage brewing business over a four year period.

It also sold off 1,200 of its tenanted and managed pubs, helping to cut its debts.

There has been speculation that the company is planning to sell about 1,000 of its remaining 1,400 pubs in order to raise enough money to complete its acquisition two years ago of Kronenbourg, formerly part of French food group Danone.

Full-year profits from the International Beer businesses grew by 52% to �107.3m, S&N said.

In the City, Scottish & Newcastle shares stood 5p lower at 605p in early trade on Tuesday.