Greene King: £1.8m on tenant support

Greene King splashed out £1.8m in helping its tenants overcome one of the "toughest trading periods for many years" in the 24 weeks to 19 October but warned worse is to come.

The Suffolk-based brewer and operator spent the money on rent concessions, service service charge waivers, stock relief, volume and off-invoice discounting and providing licensees with a range of value lagers, ales and wines at 320 Pub Partners pubs. Revenue across the division fell 2.3% to £74.8m on last year and operating profit was down 2.5% to £35.8m.

The number of closed pubs rose from 17 to 23 during the period but temporary agreements have fallen from 131 to 123 and there has also been a reduction in "cash with order" accounts. Bad debts are less than 0.5% of sales.

As previously reported in the MA, Greene King is to split its Pub Partners division in to two divisions — Independence, comprising mainly 400 leased pubs; and Core estate containing the remaining 1,060.

In the Independent division, as part of the company's efforts to attract multiple operators, for the first time a number of leased pubs could go free of tie on wine, spirits, minerals and possibly machines. Rents would be agreed on a per pub basis.

In the core estate, similar free-of-tie terms will be offered to some new tenants. And for some newcomers, a new three or five-year agreement will be offered with a fixed rent that increases annually in line with the Retail Price Index, but has no rent reviews.

The number of pubs a BDM looks after will fall from 60 to 44.

"Although we have taken a number of pro-active steps to strengthen the business, the likely continuation of difficult trading conditions will put the existing tenanted/leased model under further strain," warned chief executive Rooney Anand.

Overall, revenue rose 0.1% to £455.5m but operating profit fell 4.5% to £106.8m. Profit before tax was down 15.2% to £60.7m. It has bucked the recent trend to suspend dividends and will pay 7.3p a share.

Managed division​

Food sales now account for 34% of total sales in Greene King's 783-strong managed division — helped by its value offers. Overall sales were down 0.7% on last year to £266.3. Total like-for-like sales were down 1.6% but 1.9% up on food and 3% up on accommodation. Operating profit was down 7.4% to £52.3m.

It has extended its value offers through its Every Day Low Pricing programme in 113 Local Pubs and Hungry Horses and targeted meal deals including "feed a family of four for £12".

Operating profit at Greene King's Scottish Belhaven business was up 9.8% on last year with both managed and tenanted pubs' (324) profits growing and brewing profits broadly in line with last year.

Brewing​

Own-brewed volumes fell 3.8% during the period but revenue was in line with last year at £41.4m helped by a change in the on/off-trade mix and selective price increased. Earnings before tax, interest, depreciation and amoritisation fell 8.9% to £11.2m due to rising input costs.

Outlook​

Trading conditions in the six weeks up to 30 November were described as "challenging and volatile" with like-for-like sales in managed houses down 2.0% and own-brewed volumes down 2.3%.

"These results cover one of the toughest trading periods for many years," said Anand. "External conditions are likely to worsen in the New Year and so we continue to realign our businesses to reflect the rapidly changing environment and address our cost base to protect our profitability."