Pub and restaurant giant Greene King (GNK) has been busy doing deals and reshaping itself. At the beginning of the year it offloaded 275 pubs to Hawthorn Leisure for £75.6m and in early November it formally bid for rival Spirit Pub (SPRT). But a shifting estate - and virtually flat like-for-like retail sales growth - helped push the underlying half-year operating profit down 3.1 per cent year on year to £123m.
The first quarter was notably tough. England's swift exit from this year's World Cup meant strong comparative figures were not matched year on year, and by the end of the first-half like-for-like retail sales were up just 0.8 per cent. Figures for the pub partners division - which includes tenants and franchisees - were better in some respects: like-for-like net income rose 3.7 per cent. But property disposals saw the estate shrink by 27 per cent, which in turn prompted a 17 per cent slide in the division's revenue to £58.3m. A changed sales mix in the brewing and brands segment also delivered a 70 basis point operating margin hit, although that's expected to recover before the financial year-end.
But City analysts see the results as evidence of Greene King's "year of transition" as management works to launch the next leg of the growth strategy. That strategy involves streamlining the tenanted estate, adding more sites to the retail division and diversifying further into the eating-out market. In the first-half, the company added 11 sites to the retail estate. The Spirit deal will bring with it around 800 managed pubs and 430 tenanted and leased sites.
Encouragingly, the second half is showing signs of improvement. Management thinks the reported like-for-like retail sales performance implies growth of 1.5 per cent over the last 12 weeks, for example. Christmas bookings are also faring well, up 7.2 per cent on last year.
Prior to theses figures, broker N+1 Singer was expecting full-year pre-tax profit of £174m, giving EPS of 62.2p (from £173m and 61.1p in 2014).
| GREENE KING (GNK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 758p | MARKET VALUE: | £1.66bn | |
| TOUCH: | 758-759p | 12-MONTH HIGH: | 934p | LOW: 729p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 467p* | NET DEBT: | 133% | |
| 24 weeks to 19 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 595 | 65.6 | 31.6 | 7.60 |
| 2014 | 615 | 72.0 | 29.5 | 7.95 |
| % change | +3 | +10 | -7 | +5 |
Ex-div: 18 Dec Payment: 23 Jan *Includes intangible assets of £702m, or 320p a share | ||||
