Pub group predicting good cheer

PUBLISHED: 13:06 02 December 2001 | UPDATED: 10:58 03 March 2010

PUBS and brewing group Greene King has said it has yet to detect any sign of a fall in consumer confidence – and that it was better placed than many rivals to weather any downturn which might follow next year.

PUBS and brewing group Greene King has said it has yet to detect any sign of a fall in consumer confidence – and that it was better placed than many rivals to weather any downturn which might follow next year.

The Suffolk based company's confident statement accompanied interim results showing sales and profits both ahead compared with last year's first half, despite highly competitive trading conditions.

Group turnover for the 24 weeks to October 13 increased by 5 per cent, from £202.7 million to £213.1 million, benefiting from growth in the managed and tenanted pubs businesses and the brewing and wholesale division, and a first-time contribution from the Old English Inns company acquired in September.

"The business has achieved another period of sound organic growth while also maintaining its strategic momentum," said David McCall, the chairman of the Bury St Edmunds based firm.

Profit before tax, goodwill and exceptional items increased by 11pc to £32.0 million, although £1.3 million of integration costs relating to the Old English deal helped reduce the bottom-line pre-tax figure to £29.0 million, compared with £26.8 million last time.

Adjusted earnings per share increased by 10pc, from 26.7p to 29.5p, and the interim dividend will rise by a similar margin, from 7.15p to 7.85p per share.

Trading profit increased by 5pc to £42.7 million including a £500,000 contribution from Old English Inns which was acquired just four weeks before the end of the accounting period.

Of the 136 inns acquired as part of the Old English company, Greene King said that 81 would be retained under management, 35 smaller pubs would be transferred to the tenanted division and 20 properties, mostly leasehold, which did not fit the group's strategy, would be sold on.

During the first half, the managed estate increased its trading profit by 4pc to £22.6 million on turnover up by 3pc to £122.6 million.

The increased profit margin of 18.4pc was achieved despite a rise in food sales – which are relatively low-margin – to a record 29pc of sales, and this offset a slight reduction in the size of the estate from 506 outlets to 498.

The group's tenanted and leased estate increased its trading profit by 3pc to £16.8 million on turnover up by a similar margin at £43.2 million, despite the number of pubs in the division falling by 58 to 1,054 due to the disposal of some properties which no longer met the group's criteria.

Margins held steady at 38.9pc and growth was derived both from rent receipts, which increased by 5pc, and drink sales, with average barrelage per pub rising by 1pc and sales of wines and spirits by 8pc.

Despite operating in an increasingly competitive environment, the brewing and wholesaling division increased its turnover by 1pc to £42.1 million and its trading profit by 2pc to £5.7 million, with the trading margin held at 13.5pc.

The group's four key brands all achieved growth – Greene King IPA up 1pc, Abbot Ale up 2pc, Old Speckled Hen up 27pc and Ruddles County up 23pc – despite a 3.8pc decline in the overall UK on-premise beer market.

Looking ahead, Mr McCall said: "The business continues to trade resiliently despite difficult current market conditions.

"Like-for-like sales remain positive in our pub businesses and beer sales are ahead year-on-year, and we have seen no real evidence so far of a noticeable downturn in consumer confidence.

"Our strategy is focused on growing sustainable shareholder value," he added. "We have developed a business and quality profile which should prove more resilient than many others if the UK economy deteriorates and are, therefore, continuing to invest prudently for long-term gain."

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