This year, the pub sector faces a nasty combination of rising costs and taxes, and an ailing consumer. Nevertheless, pub and brewing group Greene King continues to look remarkably resilient against the torrid backdrop. In the year to May, the group managed to generate over £1bn of turnover for the first time since it was founded in 1799, which powered a 13.8 per cent increase in underlying profits to £140m and 11 per cent underlying EPS growth to 48.2p.
Progress was across the board. Greene King’s own-managed pubs, which account for almost 60 per cent of operating profits, benefited from two acquisitions during the year which have boosted the exposure of the business to the eating-out market as well as high-end London boozers, which have been flouting a wider downturn in trading. The acquisitions helped lift the unit's profits by 11.2 per cent to £132m. Pubs are winning market share in a flat eating-out market thanks to the value they are able to offer hard-pressed consumers, and Greene Kings focus on growing this part of its business was evident in a 8.1 like-for-like increase in food sales to £263m. Overall, the group’s own managed pubs managed to raise like-for-like sales by 4.9 per cent.
Greene King’s tenanted-pub business has continued to recover following a particularly tough patch for publicans who rent their premises. This division’s profits, which account for a third of the total, were down 1.6 per cent to £74.5m, which reflected a 3 per cent reduction in pub numbers to 1,554 but an increase in profit per pub of 1.5 per cent.
Despite a weak beer market overall, Greene King managed to increase the brewing business’s sales by 5 per cent and profits rose 4.1 per cent to £33.1m. Old Speckled Hen and IPA proved popular tipples as ever, both outperforming their respective market segments.
Broker Panmure Gordon expects pre-tax profits this year of £148m and EPS of 50.7p (2011: £140m/48.1p).
| Greene King (GKN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 500p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 499-501p | 12-MONTH HIGH: | 519p | LOW: 386p |
| DIVIDEND YIELD: | 4.6% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 452p* | NET DEBT: | 144% | |
| Year to 1 May | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 0.92 | 146 | 57.5 | 18.4 |
| 2008 | 0.94 | 148 | 71.9 | 20.9 |
| 2009 | 0.95 | 54 | 23.7 | 21.0 |
| 2010 | 0.98 | 102 | 37.8 | 21.5 |
| 2011 | 1.04 | 117 | 49.7 | 23.1 |
| % change | +6 | +15 | +31 | +7 |
Ex-div: 10 Aug Payment: 12 Sep *Includes intangible items of £706m, or 325p per share | ||||
