Greene King 'on track' despite tough trading conditions

Suffolk brewer Greene King is set to deliver a relatively upbeat message to shareholders at the group's annual general meeting today.

While acknowledging that trading conditions "remain challenging", the brewer said its model is "robust and resilient", and that in the 16 weeks to August 24, 2008, "strong cashflows allow continued investment in growth areas such as food, accommodation and premium ale, and the tough approach to cost management creates opportunities to drive further value into the business".

The brewer's results gave the City cause for a small celebration, pushing shares in Greene King up 41p - nearly eight per cent - as well as a number of beleaguered pubcos, including Enterprise Inns Punch Taverns, whose stock has taken a hammering in recent weeks.

Like-for-like sales across Greene King Retail, the brewer's managed pub estate, were down 1.6 per cent, the group said.

"Larger, food-led sites continue to perform strongly, whilst smaller, wet-led community sites are being more adversely affected by market conditions. In the value for money segment of the market, new Hungry Horse is in good growth, whilst at a more premium position both Loch Fyne and the Inns division are performing well.

"Management remains focused on achieving the optimum balance between sales, margins and profit, particularly given a cautious consumer and escalating costs," it said.

Pub Partners, Greene King's tenancy and lease division, saw like-for-like profits down 1.7 per cent.

"The environment continues to be challenging but Pub Partners' predominantly tenanted model creates strong relationships with its licensees. As a result, an increasing level of support is being provided to underpin licensee viability."

Greene King recently announced a package of measures worth £1m designed to assist those of its tenants and licensees who were finding life tough.

The group's brewing arm saw own-brewed volumes down three per cent, although it believed that that the near double-digit declines in the on-trade beer market such a decline represented a strong performance.

"Share gains continue in both the on and off-trade, and in the standard and premium ale categories," it added.

Belhaven, Greene King's Scottish operation, continued to perform ahead of expectations, with like-for-like sales in the managed pub estate up 4.6 per cent, and Belhaven Best now the fifth best-selling on-trade alcohol brand in Scotland, according to new research from AC Nielsen.

The group said its cashflow performance and balance sheet position "remain healthy and in line with forecasts. Following the successful debt refinancing, interest rates are 100% fixed and no further refinancing is required until 2012".

"Despite the current trading challenges and lacklustre outlook for the UK economy, the board anticipates meeting its expectations for the year," it concluded.