Beer sales boost for Greene King

PUBS and brewing group Greene King raised a glass to buoyant beer sales yesterday as it told shareholders that it remained on course to achieve its target for annual profits.

PUBS and brewing group Greene King raised a glass to buoyant beer sales yesterday as it told shareholders that it remained on course to achieve its target for annual profits.

In an update at its annual general meeting, the Bury St Edmunds-based company said that trading remained in line with expectations despite the unseasonal summer weather and the start of the English smoking ban.

Greene King said that it had implemented the No Smoking law across its business successfully and “remains very well placed to meet the challenges, and to capitalize on the opportunities, presented by the ban.”

The arrival of the smoke-free pub is expected to see an increased demand for food and Greene King has already responded to the ban by acquiring the Loch Fyne fish restaurant chain, in a £68.1million deal completed last month.

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Greene King, which plans to double the size of the chain to around 70 outlets, including the conversion of some of its pubs, said yesterday that it had already opened one new Loch Fyne - in Edinburgh - since taking control, bringing the current total number of restaurants to 37.

Yesterday's statement added that both parts of the group's managed pubs estate - “destination” pubs, focused heavily on food, and “local” pubs, serving a more traditional pub clientele - achieved like-for-like sales “slightly ahead” of last year during the first 17 weeks of the current year.

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On an underlying basis, stripping out the boost to sales delivered last summer by the football World Cup, like-for-like sales across the managed house business were up 2%.

At Pub Partners, the group's tenancy and lease division, total like-for-like sales were 1% ahead during the period. Greene King said this maintained “the steady growth seen last year, despite the difficult trading conditions”.

The star performer, however was the group's beer brands business which continued to out-perform the overall UK beer market. Own-brewed volumes - including Hardys & Hansons, acquired by Greene King a year ago - were up 10%, led by strong double digit growth from Old Speckled Hen and Abbot Ale.

Greene King added that Belhaven, its integrated pubs and brewing business in Scotland - where the smoking ban has been in place since March 2006 - was also on track to meet expectations, with Belhaven Best volumes up 9% in the period.

Analysts said the brewing business, which accounts for 11% of group profits, had been helped by the wet weather.

Douglas Jack of Panmure Gordon said: “Demand tends to switch back from lager to ale during colder climes.”

He added: “Overall, we view this as a creditable result in difficult conditions, reflecting management initiatives to drive food, coffee, wine and ale sales in particular.”

Greene King - which has around 2,200 pubs and posted pre-tax profits of £139.8 million for the 12 months to April 29. - gave no update on plans announced in July to unlock more cash from its property estate by spinning off around a third of its pubs into a property/operating company vehicle.

Appetite for the deal is likely to have waned in the recent market turmoil and tighter debt markets which forced fellow pubs chain Mitchells & Butlers to put a similar deal on hold.

Greene King said yesterday that, since the beginning of the financial year, it had bought back 12.4 million shares for a total value of £125million, at an average price of 1007p per share. “To date, the company's cashflow performance and balance sheet position remain healthy and in line with its forecasts,” it added.

Apart from the company's share buy-backs, Greene King chief executive Rooney Anand and finance director Ian Bull have both purchased shares in the company on their own account in the past month, apparently sharing the view of some observers that the shares have been over-sold in the recent market turmoil.

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