Greene King has reported like-for-like sales in its managed division up 1.5% for the year to 1 May with Pub Partners’ like-for-like income up 2.7%.
The group said trading in the first eight weeks of the current year had strengthened, helped by the Euros and better weather in May, with Pub Company like-for-like sales up 2.8%.
The group said: “We are pleased with the initial performance of the brand optimisation programme and the exciting opportunity this presents to deliver long-term growth.”
Including a 45 week contribution from Spirit, group revenue grew 57.6% and exceeded £2bn. Including synergies, operating profit before exceptional items increased by 53.1% and profit before tax and exceptional items grew 52.2% to £256.5m.
Brewing & Brands own-brewed volume was up 2.9% with ale market share up 40 basis points to 10.5%.
The group reiterated its plan to reduced the combined 20 brands and formats across the estate to 10, focussing on five growth retail brands and formats: Hungry Horse, Flaming Grill, Farmhouse Inns, Chef & Brewer and Greene King, as well as continuing to develop its hotels and Metropolitan, its premium London pub format. It said over 300 pubs would be repositioned into the growth brands over the next three years with a goal of converting 100 Fayre & Square pubs in 2016/17 – most to Hungry Horse.
The group said it also planned to simplify its Local Pubs estate, with fewer formats and replacing any existing retail branding with Greene King branding.
In the current year, then company expects to spend around £40-50m with an expected £1m dilutive profit impact in the first year, including the impact of additional opening costs.
The focus on brands has included trailing improved zoning in Hungry Horse, “allowing more families to dine in a comfortable environment, while other customers enjoy the option to watch sport”.
During the year there was a relaunch of the value-orientated breakfast offer in Farmhouse Inns, extended breakfast service hours in Hungry Horse and the introduction of a ‘Grab ‘n’ Go’ price point for a coffee and a pastry in Local Pubs. Including the Spirit estate, the proportion of sales generated before 5pm increased by 7.6%, including by 8.6% in the five retail growth brands.
The group has increased its focus on food and expanded its range of partner suppliers to include premium brands such as Italian cuisine focused Barrel & Stone. During the year, Local Hero, its franchise-style agreement built around local provenance, saw the opening of its 50th site while, together with Spirit, Greene King refreshed its suite of turnover agreements.
Chief executive Rooney Anand said: “It has been a transformational year for Greene King. We completed the acquisition of Spirit Pub Company and reached the milestone of £2bn revenue. We have delivered growth across each of the three divisions, outperforming the market in a challenging environment, while making significant progress in combining the best of both businesses to build Britain’s best pub company.
“I am pleased to report a strong start to the new financial year, although it is likely that consumer confidence will be affected by Brexit in the near-term. However, Greene King has a strong track record of performing well in challenging conditions, we are a resilient business with a talented team and a strong balance sheet, and we will benefit from the opportunities created by the Spirit acquisition. We are well placed to continue delivering value to our shareholders
In the Pub Company estate total sales grew by 5.1% and were up 68.7% when including Spirit, to £1.7bn.
Full year like-for-like sales growth in the Greene King and Spirit managed estates was 1.9% and 1% respectively. On a combined basis, like-for-like sales grew by 1.5%, ahead of the market, which grew by 1.3% over a broadly comparable period. The group said sales growth was achieved across food, drink and accommodation and, by brand, with Chef & Brewer a notable winner.
On a combined basis, operating profit increased 56.8% to £299.2m. The combined operating margin declined 1.4%pts. Which the group said reflected higher lease costs following the Spirit acquisition and a 0.3%pt reduction in the margin in the Greene King managed estate due to ongoing investment.
In the Pub Partners combined net like-for-like income grew 2.7% with average EBITDA per pub up 14.3%.
The addition of 416 tenanted and leased pubs from Spirit led to growth in revenue and operating profit in the year of 54.1% and 58.0% respectively. Excluding Spirit, revenue declined 2.1% due to disposals, although the operating margin improved by 1.3%pts. The combined Pub Partners operating margin increased by 1.1%pts and was positively impacted by the performance in the original Greene King estate, offset by the increased proportion of leaseholds following the Spirit acquisition. Average revenue per pub grew 13.8% in the combined estate.
During the year, Greene King spent £21.1m on maintaining and developing its Pub Partners estate. It also disposed of a 48 pubs, including the six-strong package it was ordered to sell by the CMA.
Greene King said it had adopted a ‘best of both’ approach to digital from the two estates. This included developing the online booking capabilities, which contributed to a 41% increase in online bookings. There was an 18% increase in visits to pub websites.
The company set out five strategic priorities to tackle the threat from “a wider set of competitors, including coffee shops, takeaway aggregators and grab and go stores and a faster pace of consumer change than ever before”.
The medium-term priorities are:
1. Build attractive and strong brands
2. Industry leading value, service and quality
3. Work with the best people
4. Own the best invested pub estate
5. Maintain a strong balance sheet and flexible capital structure