Greene King chief executive Rooney Anand has stressed that the group is adapting its strategy to address a changing market, however he insisted the group was not looking to exit the value food market. Speaking on the back of yesterday’s half-year results announcement, Anand said the company would continue to focus on its four key growth brands, despite the general under-performance of the Pub Company estate. He also talked about conversions between the managed and tenanted & leased estate and his views on discounting on the sector. There was also more information on changes to the senior management team and the group’s plans to invest in technology, including trialling an order & pay app.
The group has identified ways to mitigate up to £45m of the £60m added costs the business expects over the next year.
Summing up the period, Anand said: “It’s been a challenging first half for us, which is why we have taken action, investing in price, promotion, people and other aspects which have already resulted in a slight improvement in recent weeks. Our 1,000-strong Local Pubs estate has continued to outperform the market. They are largely drink-led, well-invested pubs in great locations. Pub Partners and Brewing & Brands have also traded well and outperformed their respective markets. Both businesses play an important role for the group, generating scale, identity and cash and enhancing the overall identity of the company.
“Our £45m cost saving and brand conversion programmes have given us levers to pull on both the top and the bottom line. We have a strong balance sheet, an attractive and sustainable dividends, industry-leading brands and a highly experienced management team with a track record of outperforming in challenging conditions.
“We are adapting our strategy in response to a changing environment and changing customers and this will help us ensure we sustain our long-term competitiveness, strong cash generation and attractive returns to shareholders.”
However, Anand stressed that Greene King was not looking to exit the value food market completely, saying: “Value food has perhaps been a bit more under pressure than the rest of the market but it’s not as though we’re calling time on value food. Ten years ago when the downturn came value food suffered first but in the end became quite a profitable part of the market for many operators, particularly Greene King. It’s no surprise that blue collar workers feel the pinch before many others. We’re not necessarily moving towards premiumisation, we are aligning our strategy to reflect the situation we found ourselves in. For example, we are exiting Fayre & Square but we are continuing to invest in other parts of that market, such as Hungry Horse.”
He reiterated that the Fayre & Square conversion programme was set to complete by the end of the current financial year and said the focus remained on the four key growth brands of Hungry Horse, Farmhouse Inns, Chef & Brewer and the Greene King. Anand said the latter had been well received in replacing the Taylor Walker brand across London, and now makes up c60% of the Pub Company estate.
He said Farmhouse Inns had delivered a strong first-half performance with the carvery model benefitting from poor Augusta and September weather. Average weekly sales in the brand are now at £58,000, with annualised EBITDA per pub at £539,000.
On the pressures of discounting, Anand said: “In our view there is over-capacity in the eating out and casual dining arena after a period of large-scale capital and openings. We are now seeing the first signs of stress from this. That has inevitably led to significant discounting in that part of the market and that has an impact on anyone selling food. “
During the year, Greene King transferred three non-core pubs from its tenanted & leased during the year and Anand said there would be more movement.
He said: “One of the strengths of our model is that we run a retail and a tenanted estate which are discreet and separate but complementary. We have converted both ways and we will continue to explore those opportunities to transfer assets either way.”
Anand said one of the key strengths of Greene King was in its strong management team. The group confirmed former chief property officer, Richard Lewis, has now moved into the role of chief operating officer, with responsibility for the managed division. As revealed by MCA in October, the restructure also saw John Forrest, who was chief operating officer for the Retail division is to instead take on responsibility for Pub Partners, while Clive Chesser, who took on responsibility for Brewing & Brands alongside Pub Partners earlier this year, is now focussing solely on the former.
The company is investing in its digital strategy, with enhanced WiFi rolled out to help with better guest behaviour insights and the MiondMovers customer panel launched.
The group is also trialling an order & pay app and launched its season ticket app.