Brewer warns of challenges ahead

PUBS and brewing group Greene King yesterday posted increased first half sales and profits, but warned of "more challenging" trading conditions for the rest of the year.

PUBS and brewing group Greene King yesterday posted increased first half sales and profits, but warned of "more challenging" trading conditions for the rest of the year.

In interim results for the 24 weeks to October 14, Bury St Edmunds-based Greene King said its success was down to a combination of organic growth and successful acquisitions.

Profit before tax and exceptional items came in at £71.6million, up 7% form £67.1 for last year's first half, while revenue was 6% ahead at £445.0million, up from £419.2million last time.

The figures included a full contribution from Hardys & Hansons, the Nottinghamshire-based pubs and brewing company acquired in September 2006, and a part contribution from the Loch Fyne Restaraunts chain, which Greene King bought in August this year, although its latest deal, for north of England-based New Centry Inns, came after the end of the period.

Operating profit was 11% up on last year's first half, at £111.8million against £100.9million, with all four of the group's business units - retail, tenanted pubs, brewing and its integrated Scottish business - all contributing growth.

Greene King Retail, which includes the group's managed pubs and the Loch Fyne business, saw revenue increase by 8%, from £248.0million to £268.2million and operating profit grow by 6%, from £53.2million to £56.5million.

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A dip in the operating profit margin of 0.4 percentage points, to 21.1%, was attributed by the group to the addition of the leasehold Loch Fyne property estate, although seafood chain was said to be trading in line with expectations and contributing to an increase in revenue per property.

Overall profit per outlet was also ahead of last year, despite the start of the English smoking ban, strong comparison figures relating to the 2006 FIFA World Cup and the impact of flooding at some sites.

Pub Partners, the tenanted and leased pubs business, saw a 3% increase in revenue, from £74.3million to £76.6million, and an 8% rise in operating profit, from £34.0million to £36.7million.

Operating profit per pub was ahead by a similar margin and the overall operating profit margin was 2.2% ahead of last year's first half at 47.9%.

Brewing delivered a 1% increase in revenue, from £41.1million to £41.4million and a 4% rise in operating profit, from £10.0million to £10.4million, with the operating profit margin 0.8 points ahead at 25.1%.

Greene King said that despite a "difficult" ale market, own-brewed volumes were 8% ahead of last year's first half, helped by the acquisition of Hardys & Hansons and successful off-trade promotions around the Rugby World Cup.

Old Speckled Hen remained the nation's top-selling premium ale in supermarkets, with overall volume for the brand growing by 6.8%, while Greene King IPA, Britain's biggest-selling cask ale, saw volume growth of 4.3% and its share of the cask ale market increase by 1.4 percentage points to 17.7%.

Greene King said a key factor behind the success of IPA was its sponsorship of English rugby, adding: "Given the heightened interest in rugby following England's extended run in the World Cup, we are delighted that we signed a four year deal last year to be the Official Beer of England Rugby."

Belhaven, the group's integrated pubs and brewing business in Scotland, saw a 5% increase in revenue, from £55.8million to £58.8million, and a 16% jump in operating profit, from £11.5million to £13.3million.

The operating profit margin was up a full two percentage points, at 22.6%, and Greene King described the performance as "very pleasing", following profit growth of 4% in the first year of the Scottish smoking ban.

Overall, Greene King's bottom line pre-tax profit came in at £81.4million, further boosted by exceptional income of £9.8million, chiefly related to property sales, against £57.5million at last year's half way stage when the figure included one-off charges of £9.6million, relating to financing and integration costs.

The group, which spent £126.4million on share buy-backs during the first half, representing more than 8% of its equity, plans to pay an interim dividend of 7.3p per share, an increase of 13% compared with last year's half-year payout.

Chief executive Rooney Anand said yesterday: "These record results have been underpinned by sales and profit growth across all our businesses. This, combined with £126.4million of share buy-backs, has generated substantial earnings growth in the first half.

“We have had a very successful first half but we expect the remainder of the year to be more challenging. We will, however, benefit from the underlying strength of our business, recent acquisitions and our strong financial management. Overall, we are confident of an earnings performance in line with expectations."