‘Strong’ first half for Bury St Edmunds-based Greene King following Spirit acquisition

Greene King chief executive Rooney Anand, left, with Mike Tye, chief executive of the Spirit Pub Com

Greene King chief executive Rooney Anand, left, with Mike Tye, chief executive of the Spirit Pub Company, outside Spirit's headquarters in Burton-upon-Trent on the day the Suffolk company's acquisition of Spirit was completed in June. - Credit: Archant

Pubs and brewing group Greene King today reported a “strong” first half, with the acquisition of the Spirit Pub Company contributing to a near-50% increase in turnover.

Group-wide revenue for the 24 weeks to October 18 totalled £917.7million, up 49.2% on last year’s first half, with operating profit 46.1% higher at £180.2m and pre-tax profits, before exeptional items, 46.9% up at £121.3m.

Excluding the impact of the Spirit acquisition – which was completed in June, making Greene King the UK’s largest operator of directly managered pubs – revenue was 5.4% ahead of the same period a year ago at £648.4m, with operating profit 4.1% higher at £128.3m and pre-tax profit 5.9% up at £87.5m.

Growth in revenue and profit was achieved across each of the group’s divisions, including Greene King Retail, its core managed house business, where like-for-like sales rose by 2.0%, and the Spirit managed estate, which saw like-for-like sales growth of 1.2%.

Pub Partners, the group’s leased and tenanted pubs business, recorded a 2.4% like-for-like increase in net income and own-brewed volume within the Brewing & Brands division grew by 3.6%.

At the bottom line, exceptional items, largely made up of finance costs, left a statutory pre-tax profit of £84.9m, compared with £72.0m a year earlier.

Greene King added that the integration of the Spirit business was running ahead of plan and was now expected to result in savings of £35m a year, compared with an original target of £30m.

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Greene King chief executive Rooney Anand said: “It has been a strong first half, with the Greene King business strengthening and significant progress made in the Spirit integration.

“Like-for-like sales growth in Greene King Retail improved during the half and both Pub Partners and Brewing & Brands delivered profit growth and margin expansion.

“We completed the acquisition of Spirit Pub Company and, by combining the best of both companies, made good progress in capturing value from the acquisition and creating the UK’s leading pub hospitality company.

“We believe we have the best portfolio of retail pub brands, the best pub assets and the most talented team which, when combined with the strong contribution from synergies and the benefits of our enlarged scale, will ensure we continue delivering value to our customers and our shareholders.”

The enlarged managed house business saw total revenue climb by 59.0% to £740.2m, and by 6.7% to £496.6m excluding Spirit, while operating profit grew by 49.8% to £137.4m on a combined basis, and by 5.3% to £96.6m within the Greene King business.

The average number of pubs trading during the period grew by 49.4% to 1,548, largely accounted for by the addition of Sprit but with the Greene King estate also growing by 2.7% to an average of 1,064 sites.

The increases in like-for-like sales were driven by the Farmhouse Inns and Metropolitan brands within the Greene King portfolio and by Chef & Brewer and Taylor Walker in the Spirit estate.

Within the leased and tenanted business, the addition of Spirit saw revenue grow by 40.8% in total to £82.1m, despite a dip of 3.3% within the Greene King estate to £56.4m.

However, an overall 20.0% increase in the average number of pubs trading, to 1,094, included a 7.9% reduction in the Greene King estate to 840 as a result of disposals.

Despite this, operating profit grew by 0.4% to £25.8m within the Greene King business and by 42.8% overall to £36.7m. The disposal of lower performing pubs saw earnings per site grow by 8.7% at Greene King and by 17.8% overall.

Revenue at the Brewing & Brands division grew by 4.7% to £95.4m and operating profit by 5.1% to £14.5.

Greene King IPA increased its market share following volume growth of 6.9%, a figure assisted by the fact that the ale is now on sale at more than 90% of Spirit’s managed pubs, and there was also further strong growth for Old Speckled Hen and its family of associated brands.

Under plans announced in August, Greene King’s headquarters will remain in Bury St Edmunds, together with Pub Partners and Brewing & Brands, but the merged Greene King Retail business will be run from the former Spirit head office in Burton-upon-Trent.

In its August announcement, Greene King pledged to keep redundancies to a minimum. There was no update on numbers in today’s statement, with the group saying: “We anticipate that the people transition will complete towards the end of the financial year.”

The first-half dividend will be increased by 6.3% to 8.45p per share.