Greene King reports half-year revenue growth

The figures exclude the non-core pubs sold during F14 and H115 - when included, these dragged PBT down 3.5%, with revenue up 3.3%.

Retail like-for-like sales for the period were up 0.8% with Pub Partners like-for-like net income  up 3.7% and Brewing & Brands own-brewed volume rising 5.9%.

The company said that after 30 weeks, Retail LFL sales were up 0.8%, implying growth of 1.5% over the last twelve weeks. Within this, its southern estate strongly outperformed its northern estate.

While the latest Greene King Leisure Spend Tracker highlighted that more people expect to spend less on eating and drinking out this Christmas, the group said that encouragingly, bookings for the festive period are currently up 7.2% on last year.

The company said it was confident the deal to acquire the 800 managed pubs and 430 tenanted and leased sites that make up Spirit Pub Company would be completed before the end of this financial year.

Greene King added 11 sites to its retail estate at a total cost of £14.5m during the financial period, leaving it with 1,040 sites at the period-end.

MRO​

Chief executive Rooney Anand said he was “surprised and disappointed with the amendment to the Small Business, Enterprise and Employment Bill”.

He said: “While there are a number of unknowns in the amendment, we are confident we will have sufficient optionality to mitigate the potential impact, if and when the proposed changes take effect.”

Looking ahead, it expects a slight moderation in the operating margin decline for the retained business in the full year due to improved trading, increased cost savings and lower net cost inflation. 

'Customer-focused strategy'​

The company said: “We have maintained momentum in our other two businesses. After 28 weeks, Pub Partners’ LFL net income was up 3.4% while in the last six weeks Brewing & Brands OBV was up 12.0%, leading to growth of 7.1% after 30 weeks. 

“With real incomes struggling to grow, customers remain cautious about spending on eating and drinking out. As a result, we will continue to tailor our customer-focused strategy to ensure we deliver another year of progress, long-term growth and strong returns to our shareholders.”

The company said it delivered a return on capital employed (ROCE) of 9.2%, in line with the end of the previous financial year, but a 20 bps improvement over the first half last year. 

It said that this performance was achieved despite a subdued consumer environment.

'Consumer caution'​

The group said: “The consumer outlook is favourable, but current consumer caution has been reflected in volatile spending on eating and drinking out over the last few months, as highlighted by the Greene King Leisure Spend Tracker.

“In this market context, we made progress in a number of key areas of the business including food sales rising to 42% of Retail sales, achieving a material improvement in our Net Promoter Score (NPS) and improving our food hygiene scores by 4.7%.”

It said that since the current strategy commenced, the average EBITDA per pub generated by new sites of £413k is significantly higher than its original expectation for the five-year plan.

Reducing the Pub Partners estate and improving estate quality. In Pub Partners, the group accelerated its strategy with the disposal of 275 non-core pubs to Hawthorn Capital. In total, it sold 299 non-core sites in the period and transferred two to Retail, taking the estate to 864 pubs and generating growth in the average EBITDA per pub of 13.8%.

Maintaining industry-leading beer brand investment to strengthen our leadership position. It increased its volume share of the UK ale market by 80bps to 10.1%.

Spirit agreement​

On 4 November, the company announced its had reached an agreement with the board of Spirit Pub Company on the terms of a recommended offer for the company.

It said: “The transaction is strategically and financially compelling, accelerating the growth of our retail estate, strengthening our position in the eating out market and delivering value to our shareholders.

“The combined entity would comprise an estate of over 3,100 pubs, restaurants and hotels including over 1,000 pubs in London and the south east. A combined managed estate of over 1,800 pubs will create the UK’s leading managed pub operator and will allow us to extract significant operational synergies including benefiting from enhanced purchasing and distribution scale. Overall, we expect to realise operational efficiencies and cost savings of at least £30m per annum, supplemented by potential further revenue synergies from brand optimisation and sharing best practice.

“Spirit Pub Company is our near-term priority and would represent an important strategic step for Greene King. Following completion of the acquisition and integration of Spirit, the enlarged estate would position us to continue to explore suitable opportunities to further increase our exposure to eating out and daytime trading.”

Expenditure​

Total expenditure during the period was £76.8m. Capital expenditure on the core estate, including maintenance capital, was £41m, an increase of £2.7m over last year. A further £11.2m was invested in acquiring single sites and £24.6m was invested on developing previously acquired sites and transfers from Pub Partners. On a full year basis, the company expects investment in its core estate to be in the region of £85m.

The group said it continued to expand its digital offer. During the period, traffic to its websites grew by 18%, the number of loyalty card holders grew by 22%, and its overall database grew by 55%. It said this was driven by the ‘Golden Ticket’ data capture initiative in Hungry Horse, whereby customers can enter a monthly prize draw to win a £100 golden ticket.