World Cup boost last year
Wet weather hits start of trading year for Greene King
Pubs enjoyed a boost from last year’s World Cup
Brewer and pubs group Greene King, which owns Belhaven, saw its pub company like-for-like sales ahead of the market by 2.9%, driven by the good weather and last year’s World Cup.
However, trading over the first eight weeks of the current trading year has been impacted by the poor weather.
Adjusted group profit before tax was 2.6% higher at £246.9m, while the dividend is maintained at 33.2p.
Chief executive Nick Mackenzie, who took over two months ago, said: “The business delivered good results last year, regaining trading momentum in Pub Company and returning to market outperformance while fulfilling a strong cost mitigation programme and making further progress refinancing the Spirit debenture.
“The existing strategy we have in place has led the business through challenging times. I am looking forward to building on Greene King’s strong foundations with a focus on innovation, on developing our people and on customer service to further enhance our brands and deliver sustainable growth for our shareholders.”
Ed Monk, associate director from Fidelity Personal Investing’s share dealing service said: “Greene King shareholders can toast another dividend from the brewer and pub company following solid results today. Last year’s hot summer and World Cup boosted the numbers and management warned that it cannot expect such helpful conditions this year but, that said, the company has been performing better than the market overall, with like-for-like sale up 2.9%.
“CEO Nick Mackenzie is only two months into the job and the market is watch closely for any signs of a change in strategy, including the dividend which has begun to look expensive. In commentary today the company cited its long-term track record of maintaining shareholder payments, which will ease fears of an imminent cut.
“Greene King explained that trading for the pubs industry in general has been tough, with fewer premises open, with restaurants in particular suffering closures. Its strategy now involves appealing to more ‘well-being’ conscious millennials, including offering up healthier food options.”
John Moore, senior investment manager at Brewin Dolphin, said: “Against a challenging retail and restaurant environment, it’s a reasonable set of results from Greene King. Like-for-like sales are 2.9% ahead over the year, which reflects a slowing in the second half.
“Profits are marginally up compared to last year and the company has done a good job of mitigating cost inflation, which is the major challenge in the wider pub and restaurant sector. But the key to Greene King’s future success will be continuing to simplify its business while refinancing and paying down debt which, although reduced, stands at four-times EBITDA – this feels too high given the need to re-invest and innovate in a challenging environment.
“Greene King has some good brands that have the potential to develop further and a well-established estate; if progress can be made on lowering debt and the cost of debt, then this should prove rewarding for patient shareholders.”