Shares in Greene King rose by more than 8 per cent after the pub chain and brewer posted hearty half-year results. The performance was even more impressive when set against the tough economic climate and the lacklustre performance seen at most of its rivals.
The group managed a like-for-like sales increase of 4.6 per cent, and said that the strong trading performance had continued after the period-end. Own-brewed volume growth was also strong, up 9.8 per cent in a UK ale market that contracted by 4.7 per cent. The improvement suggests that, in the face of a smoking ban and an economic slump that saw more people preferring to drink at home, management's decision to place greater emphasis on customer satisfaction is paying off. That included a broader choice of food and drink, as well as a programme of refurbishment within its 774 managed outlets, which saw turnover there climb 4.5 per cent to £278.2m.
But the tenanted side of the business faced a much tougher time, and meant overall operating profits slipped 3 per cent to £103.3m. Turnover in its pub partners' operation fell 8 per cent to £68.8m and operating profits were 13.7 per cent lower at £30.9m. But there are signs that its two-year turnaround programme is working. The number of pubs closed for reopening has fallen from 30 to 20, while bad debt as a percentage of sales has also fallen.
Elsewhere, Greene King's Belhaven Scottish operation reported solid growth, with turnover up 14.6 per cent at £72.2m and operating profits 8.9 per cent higher at £15.9m. Increased emphasis on food sales paid off here, too - while overall like-for-like sales grew by 10.1 per cent, food sales grew by 26.4 per cent, and now account for 29 per cent of overall sales.
Net debt has also been reduced, thanks partly to a successful rights issue in May that raised £207.2m. Part of the proceeds were used to buy back securitised debt, while the balance helped to finance acquisitions.
Broker KBC Peel Hunt expects full-year adjusted pre-tax profits of £117.2m and EPS of 40.8p (£118.5m and 53.2p in 2009).
| GREENE KING (GNK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 435p | MARKET VALUE: | £937m | |
| TOUCH: | 425-437p | 12-MONTH HIGH: | 547p | LOW: 274p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 406p* | NET DEBT: | 154% | |
| Half-year to 18 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 446 | 24.0 | 12.3 | 5.90 |
| 2009 | 465 | 51.2 | 18.2 | 5.90 |
| % change | +4 | +113 | +48 | - |
Ex-div: 24 Dec Payment: 29 Jan *Includes intangible assets of £677m, or 314p a share | ||||
