Greene King half-year profits up 2.8%

Brewing group Greene King has today announced an interim result that shows revenue grew by 4.3% to �464.5million in the first half of the year.

Greene King half-year profits up 2.8%

BURY St Edmunds-based brewers Greene King said it had been “ruthless on cost” during the economic downturn hit as it toasted healthy half year profits yesterday.

The group, which announced half year pre-tax profits up 2.8% to �62.4million yesterday, said it was in a stronger position than others in the sector after taking steps going into the recession to support the business.

Chief executive Rooney Anand said they were “good” figures given the difficulties and challenges that had been widely publicised within the economy, and that they had “taken the initiative”.

“We saw the signs as early as the autumn of 2007,” he said, and had acted quickly in the spring of 2008 to combat the problems.

Among its strategies in the recession was an increased focus on Sunday roast meals at its Hungry Horse and Old English Inns. It also gained from the larger talent pool of staff created by the recession.

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However, its tenanted pubs business had weathered another “tough” trading period and its reduced pool of pubs trading, down from 1,469 to 1,382, had resulted in an 8% fall in revenue within that business.

“We took a hit there,” admitted Mr Anand, who added that he said it would be a two-year turnaround.

Overall, the group's revenue grew by 4.3% to �464.5m in the first half of the year with like-for-like sales growth of 4.6% for the 24 weeks to September 2009.

Operating profit was 3.3% lower than the previous year at �103.3million and earnings per share was 22.6p, 17.2% down on the previous year, due mainly to the dilution by a rights issue, which the company has used to pursue acquisitions. Debt was reduced by �211.5m.

“Many companies have already failed to make it through the recession and more are likely to fail. Strong, focused and resilient businesses such as Greene King have prospered and I expect us to continue to do so,” said Mr Anand.

However, he warned that while 2009 had proved less severe than they had feared, the consumer outlook for 2010 was uncertain, with the spectre of low pay growth, tax increases, rising unemployment, rising interest rates and public sector cutbacks.

At the same time as Greene King declared its interim result it also released news of an agreement to acquire seven pubs in Scotland from Mitchells & Butlers PLC ("M&B") for �12.7m.

The acquisition will be financed from the funds raised by the company's rights issue and is expected to complete on December 8.

The company says the pubs meet the criteria stated at the time of the rights issue of being high quality, freehold, managed houses in one of its key target geographies.

They will be managed within Belhaven, which was bought by Greene King in 2005 and achieved 8.9% profit growth in the first half of this year.

Greene King says the deal represents another important step for the company as it continues to build on its strong position in Scotland.

“Scotland is a key area of focus for Greene King and these high quality pubs will fit very well into the Belhaven estate,” said Mr Anand.

Mr Anand said he was very pleased with Greene King's performance in the first half of the financial year.

“Whilst the environment remains demanding, each one of our businesses has made substantial progress in their respective markets and profit growth has been achieved in Retail, Belhaven and Brewing Company.

“We have delivered additional value to our customers and offset most of the cost pressures with limited impact on our margins.

“We were a strong business going into the recession and as a result of the actions we have taken, we are well placed to continue to outperform the sector.

“Although the economic outlook remains uncertain, I am confident we can build on this strong first half performance and continue to deliver value to our shareholders.”

The board has declared an interim dividend of 5.9p per share, in line with the equivalent period last year.