Greene King's (GNK) full-year results were aided by the dual boost of the World Cup and exceptionally warm weather last summer. Pub company sales were up 1.8 per cent to £1.8bn, while like-for-like revenue increased by 2.9 per cent. All this was achieved against a contracting estate, with the number of pubs trading falling from 1,754 to 1,711. As part of the reduction in locations, Greene King has also consolidated some of its brands. Managed pubs now operate under four key brands – being Greene King Locals, Chef & Brewer, Farmhouse Inns and Hungry Horse – down from the 14 brands it operated in 2015.
Trading in pub partners was also affected by a reduction in the size of the estate, as revenue fell 2 per cent to £190m on the back of a 5 per cent decline in the average number of pubs to 1,083 locations. While this division is smaller than that of pub companies, management rationalised that pub partners generates “significant and stable” cash flows, adds scale for purchasing, enhances the brand and provides flexibility on estate planning. During the year 11 pub company locations transferred to partners.
Brewing and brands saw an improvement in sales, up 5.8 per cent to £228m, but a 3.4 per cent decline in own-brewed volumes, coupled with the estate rationalisation and increased costs, meant that operating profit in the division fell 10.7 per cent to £27.4m. Nick Mackenzie, who took up the role of chief executive in May after Rooney Anand spent 14 years in the post, said that there are “no plans” to sell the brewing business, as Fuller, Smith & Turner (FSTA) did earlier this year, as it is “absolutely clear” that brewing is a key part of Greene King’s heritage.
The pub sector has experienced unprecedented cost inflation in recent years, driven by increases in business rates and the national living wage. Greene King managed to mitigate £35m in costs over the year through measures such as reducing staff during non-peak hours, thereby limiting net cost inflation to £14m.
Analysts at Peel Hunt expect adjusted pre-tax profits of £246m during the year to April 2020, giving EPS of 64.4p, rising to £251m and 65.6p in FY2021.
| GREENE KING (GNK) | ||||
| ORD PRICE: | 604p | MARKET VALUE: | £1.87bn | |
| TOUCH: | 603-604p | 12-MONTH HIGH: | 706p | LOW: 467p |
| DIVIDEND YIELD: | 5.5% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 680p* | NET DEBT: | 92% | |
| Year to 28 Apr | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 1.32 | 118 | 40.9 | 29.75 |
| 2016 | 2.07 | 190 | 64.4 | 32.05 |
| 2017 | 2.22 | 185 | 49.0 | 33.20 |
| 2018 | 2.18 | 198 | 59.1 | 33.20 |
| 2019 | 2.22 | 173 | 38.9 | 33.20 |
| % change | +2 | -13 | -34 | - |
| Ex-div: | 8 Aug | |||
| Payment: | 13 Sep | |||
| *Includes intangible assets of £1.22bn, or 393p a share | ||||
