The Week Ahead: Figures due from Greene King, Carpetright and Ocado
- Credit: PA
Full-year figures from Greene King will put the pubs and brewing group back in the spotlight this week after its recent takeover of the Spirit Pub Company while updates from the retail sector will include confirmation of a return to profit for Carpetright.
Greene King is expected to see its full-year profit slip when it posts full-year results on Wednesday, but the City thinks its recently completed £774 million merger with rival Spirit could fix that.
The City expects the Bury St Edmunds-based firm, which includes eating out brands such as Hungry Horse and Loch Fyne Seafood and Grill, to post pre-tax profits down 3.6% to £166.9million, reflecting weaker trading and lower margins in its managed pubs.
However, brokers have high hopes for the acquisitin of Staffordshire-based Spirit, which completed last week.
The move brings together Greene King’s 1,900 pubs, restaurants and hotels, also including brands such as Eating Inn, Farmhouse Inns and Flame Grill, with Spirit’s 1,200 pubs, which operate under brands including Chef & Brewer, Fayre & Square, Flaming Grill, John Barras, and Taylor Walker.
To satisfy the concerns of the Competition and Markets Authority, the two groups only had to agree to sell 16 pubs around the country.
On completion of the deal, Greene King underlined that it has a record of making mergers work, having completed around 20 deals since 1999 with a total value of over £2billion.
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However, brokers will still want to know more abut the plans for the group. Analysts at Shore Capital said: “We see the completion of its merger with Spirit Group providing faster earnings growth and greater visibility.”
Online grocer Ocado is set to continue on the front foot with a rise in half-year profits tomorrow, despite the harsh environment set by the supermarket price wars.
Brokers at Numis expect Ocado, which delivers goods for both Waitrose and Morrisons, to post half-year earnings up 9.3% to £37.5m as growing orders offset a decline in average basket sizes.
The grocery market is caught in a tough supermarket price war as major players such as Tesco and Sainsbury’s battle discounters such as Aldi and Lidl.
Numis said that Ocado’s leading online technology will continue to give it an edge. It added: “We expect further solid progress despite the ongoing pricing pressure facing the UK grocery industry.” But Numis said it will want to hear from management about the impact of price deflation on basket sizes and gross margins on the business.
Ocado revealed in February it made an annual profit for the first time since it was founded nearly 15 years ago, producing a bottom-line surplus of £7.2m after sales jumped by nearly 20%.
It is almost two years into a £170m 25-year delivery partnership with Morrisons, but its long-running deal with Waitrose allows the upmarket grocer to pull out in September if it wishes.
Ocado recently announced plans to open a fourth distribution centre in south-east London by 2017, in addition to current sites at Warwickshire and Hertfordshire and a third site planned for Hampshire later this year.
Floorings firm Carpetright will show further evidence of its turnaround on Tuesday when annual results confirm a return to profit.
The firm, which runs 459 UK stores, said in April it expected to swing into the black with full-year profits of £13m against losses of £7.2m the previous year, due to improved trading momentum. This topped previous City forecasts of between £10m and £11 for the year.
The retailer, under chief executive Wilf Walsh, has focused on a more contemporary market and has kept discount levels under tight review while also introducing interest free credit to the business on Boxing Day.
It has launched a trial of smaller high street stores, which will feature a sample only premium product, and has emphasised the importance of the internet for driving customers into its shops.
Brokers at Shore Capital said: “Carpetright has learnt that bigger does not indeed mean better with regard to the optimal number of stores for its estate.
“We support this view, believing a more efficient but smaller store footprint will enable the business to continue its recovery, stripping out operating costs and releasing free cash.”
Mr Walsh, previously managing director of bookmaker Coral, took the helm of the business last July from founder Lord Harris of Peckham.
A year ago, the group slumped to a £7.2m bottom-line loss, dragged down by much weaker trading at its European operations.
Mr Walsh said recently the group was well positioned to grow market share and profitability under plans to extend the appeal of the Carpetright brand.