News Column

Greene King Annual Profit Falls And Sees Slower Start To New Year

July 3, 2014

Rowena Harris-Doughty

LONDON (Alliance News) - Greene King PLC Thursday posted reduced profit for its last financial year despite good revenue growth, due to higher exceptional costs, and said like-for-like sales in its managed retail division have started the new year slower than they did the year before.

But signalling its confidence in the business going forward, British brewer and restaurant owner increased its dividend for the recent year by 6.8%.

Greene King recorded a pretax profit of GBP105.2 million for the year ended May 4, down from GBP111.0 million the prior year, which it said was due to higher exceptional costs booked during the year. Excluding those costs, the group's pretax profit rose 9.4% to GBP158.2 million.

Revenues on the other hand rose to GBP1.30 billion from GBP1.19 billion a year earlier, driven by strong trading in its retail business, which includes brands - Hungry Horse, Old English Inns, Loch Fyne Seafood & Grill, and Eating Inn - as more customers ate and drank at its pubs and restaurants, and as it opened more sites. It said it also saw an increase in the share of sales from promotional activity, especially in food.

The company's brewing business, which includes the brands Greene King IPA and Abbot Ale, continued to be driven by its premier ale brand Old Speckled Hen.

Its Pub Partners estate however posted a 4.5% decline in revenue as the division continued to dispose of pubs during the year, although it said average revenue per pub was up 4.4%, driven by per pub increases in beer volume and rental income.

"Looking ahead to the rest of the year, we anticipate an improvement in like-for-like retail sales and continued momentum in both Pub Partners and Brewing & Brands," said Chief Executive Officer Rooney Anand in a statement. "We are confident of achieving another year of strong progress."

The company declared a 6.8% increase in its dividend for the year, to 28.4 pence per share.

Greene King said the good trading momentum has continued into the new financial year, with like-for-like sales in its retail business up 1.1% in the first eight weeks, albeit slower that the 3.3% growth in reported in the same period a year earlier.

The group also said it is seeing regional differences, with its London and South England pubs posting strong growth, while its pubs in the North of England have seen sales decline.

"Current trading appears a little soft with like-for-like sales in the core retail (managed pubs) division ahead just 1.1%... with the statement highlighting a soft May and June in the eating and drinking out markets," said analysts at Shore Capital in a research note Thursday morning.

Greene King shares were one of the biggest fallers on the FTSE 250 Thursday morning, trading 3.3% lower at 819.38 pence.

However, outside the managed-pub business, Greene King said it has seen a strong start to the year. Like-for-like net income in the Pub Partners estate was up 3.5%, it said, with Brewing & Brands overall beer volumes, "helped by strong take home sales due to the World Cup", up 6.2%.

Greene King has spent the last few years expanding its retail business and reducing its Pub Partners estate by selling off non-core sites and improving the quality of the estate.

During the year, the group disposed of 133 non-core sites, transferred 15 sites to its retail portfolio, and signed a deal to sell a further 275 non-core tenanted sites to Hawthorn Leisure.

The group said it plans to open 50 to 60 new retail sites this year.

"Looking forward, while the impact of selling a significant number of non-core pubs will slow growth in the new financial year, a combination of an improving external environment, maintained sales momentum in retail and the continuation of our successful retail expansion programme should deliver strong and sustainable earnings and dividend growth," the company said.

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Source: Alliance News

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