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Greene King given boost by strong food sales
INNS to real ale group Greene King said strong demand for pub food has pushed sales up sharply in the first four months of its financial year.
Greene King, which has around 100 pubs in Yorkshire, said like-for-like sales at managed pubs in England including the Old English Inns and the Hungry Horse chain grew by 4.6 per cent in the 17 weeks to August 30.
The growth was driven by the strength of the food operations, where the like-for-like sales figure rose 8.1 per cent.
Despite the robust trading figures, Greene King was fairly downbeat about overall prospects for the pub industry.
Sales growth is expected to moderate in the second half due to tougher year-on-year comparatives and Greene King said it remained cautious on the outlook for the industry and the economy as a whole.
"The consumer recovery is fragile and there are numerous risks to current levels of consumer spending, particularly for the second half of our financial year, including rising unemployment and taxes, slowing wage growth and increasing debt repayments," it said in a statement ahead of yesterday's annual shareholders' meeting.
While the outlook for the sector remains gloomy, Greene King said it is stronger now than it was before the downturn and it is in a position to continue outperforming the market.
The group, which has more than 2,000 pubs, raised 207m from a rights issue earlier this year and has so far used 47m of the proceeds on pub acquisitions and debt repurchase.
Deutsche Bank analyst Geof Collyer said the performance had been "very robust", adding that a decline in operating margin of less than 100 basis points over the period was 50-60 basis points better than his forecast.
Managed pubs have generally outperformed tenanted pubs across the industry throughout the consumer downturn, benefiting from greater flexibility for pricing and promotional activity.
Average earnings before interest, tax, depreciation and amortisation (EBITDA) at the group's 1,500 tenanted pubs, which accounted for just over a third of earnings last year, fell by 7.2 per cent.
The pub industry has had a torrid couple of years as the smoking ban, a crippling recession, hikes in beer taxes, poor weather and cheap alcohol offers in supermarkets have kept drinkers at home.
The UK's biggest pub operator, Punch Taverns, said in August it was on track to meet full-year expectations as it benefited from price cuts, promotions, and new food menus, but added there was little sign of demand improving as recession-hit shoppers cut back on drinking and eating out. Rivals JD Wetherspoon, Mitchells & Butlers, Enterprise Inns, and Marston's are due to give trading updates later in September.
Investec Securities analyst Matthew Gerard said figures for Greene King's managed pub estate were better than expected, given the pressure from recent poor weather conditions and the consumer backdrop.
However, he added: "We agree with management's view that prospects for the sector going into 2010 are highly uncertain."
The group's brewing volumes were up 12 per cent, which was in line with previous trends. The company said the growth was driven by strong performances in both pubs and the off-trade, particularly from Old Speckled Hen.
In July the group held its final dividend at 15.1p per share and said it would pursue a dividend policy of around two times underlying earnings in the future.
The shares closed up 2.5p at 482.9p last night.
Two centuries of brewing
Greene King has run its pubs division and brewing operation for over 200 years.
The group brews a number of well-known traditional ale brands such as Greene King IPA, Abbot Ale, Old Speckled Hen and Ruddles County.
Through a series of acquisitions, Greene King has grown steadily into a leading pub retailer and brewer.
The group's managed house division, known as Pub Company, encompasses both the Old English Inns and Hungry Horse chains. It is now the third-fastest-growing managed pub business in the UK.
The Pub Partners division is involved with the running of Greene King's tenanted and leased pubs ranging from school country taverns to high street city centre sites.
The Brewing Company is responsible for the market-ing, sales, production and distribution of Greene King's range of ales and beers.
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Thursday 24 May 2012
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