The Week Ahead: Figures due from Greene King, TUI Travel and Pets at Home
- Credit: Archant
Pubs and brewing group Greene King, travel giant TUI and retailer Pets at Home should all show they are benefiting from improved UK consumer confidence when they report results this week.
The planned £774million acquisition of Spirit Pub Company by Greene King will be under the spotlight when it presents its half-year results on Thursday.
The deal agreed earlier this month will create a firm with more than 3,000 managed and leased pubs under brands such as Fayre & Square, Flaming Grill, Hungry Horse and Loch Fyne.
Greene King chief executive Rooney Anand said the acquisition was a key step towards building the “best pubs and beer business” in the UK.
The takeover allows Bury St Edmunds-based Greene King, which currently has around 1,900 outlets, to shift the balance of its estate towards more profitable outlets it manages rather than tenanted operations.
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It is particularly keen to benefit from Spirit’s exposure in London and the South East, and has said that the deal will be earnings enhancing in two years.
The Irish maker of Magners cider, C&C, launched a rival bid for Spirit, but saw its October offer rejected by the board of the Burton-on-Trent-based firm.
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The merger is expected to generate £30m a year of cost savings from areas such as overlapping corporate and support functions, although Greene King said it has not yet developed proposals on headcount reductions.
Investors will also want Greene King’s guidance on the vote by MPs earlier this month to unwind the tied link between tenants and pub chains.
The reaction to the vote sent shares in pub companies down by as much as 17% the following day, with the amendment potentially affecting the 20,800 of Britain’s 48,000 pubs that are subject to beer ties, under which tenants pay lower rents than non-tied pubs but higher prices for their beer and other drinks.
In July Greene King served up its fifth year in a row of record results with annual underlying profits lifting 7.4% to £173.1m.
Mr Anand said: “There are now clear signs that both the UK economic outlook and consumer confidence are improving, although consumers continue to spend cautiously.”
Greene King’s full year profit for the current year is expected to be up by another 1.7% to £176m.
Thomas Cook’s warning that its growth is likely to moderate in the coming year due to Europe’s economic woes spooked the travel sector and placed added pressure on rival TUI Travel ahead of its full-year results on Thursday.
The FTSE 100 firm, which owns First Choice and Thomson Holidays, should deliver a rise in earnings of 3.9% to £612m for the year to September 30 following record performances in the UK and Germany.
Despite facing increased competition from a resurgent Thomas Cook, TUI’s most recent trading update pointed to increased demand for unique holidays, such as luxury and all-inclusive deals, and strong online bookings.
The results come as the company prepares to complete a merger with its German parent TUI AG, creating a firm which serving 30m customers and owning 230 hotels and seven cruise ships.
The merger, which is due to be finalised in mid-December, has been mooted since 2007 when TUI Travel was created through the merger of Britain’s First Choice holidays and the tourism business of TUI AG. The German parent currently owns just over half of TUI Travel.
The company said in its October update that most of its holidays were fully sold over the summer, with average selling prices slightly higher in the UK.
This resulted in full-year underlying profits growth of at least 9%, against its previous guidance of between 7% and 10%, but offset by sterling’s strength against the euro and a provision of £27 million against loans made to its joint venture operation in Russia amid challenging trading conditions.
Numis analyst Wyn Ellis said: “We believe that TUI Travel is a better quality business than Thomas Cook and do not anticipate any surprises with the preliminary results.”
Pets at Home is expected to show it has bolstered its lead in the pet care market when it posts first-half results on Thursday.
The chain, which runs 385 pet shops and 303 vets practices, is poised to almost double its underlying pre-tax profit to £41.3m as its expands its operations, according to Bank of America Merrill Lynch.
The group is the largest small animal veterinary services provider in the UK after the integration of Vets4Pets, which it acquired in March last year.
In a trading update last month, it said it had opened 26 vets practices, 23 pet pampering Groom Rooms and added a net figure of eight new stores in the 28 weeks to October 9.
It said it is on track to open a total of at least 25 new stores, 60 new veterinary practices and 50 new Groom Rooms for the full year. Total sales rose 10% to £381.5m, with like-for-like sales up by 4.2%.
Analysts at Bank of America Merrill Lynch said Pets at Home has a strong 12% share of the resilient £6 billion UK pet care market and by increasing its footprint “should consolidate its leading position.”