Greene King pubs report challenges are ahead despite revenue bubbling up to record levels

Courtney Goldsmith
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Analysts said Greene King pubs face hard times ahead (Source: Greene King)

Record revenue was reported in Greene King's interim results, but shares fell in morning trading and analysts warn of a hangover.

The figures

Adjusted profits before tax rose 14.6 per cent to £139m, and adjusted earnings per share were up 4.3 per cent to 36p for the pub company.

Like-for-like sales increased 1.3 per cent, which was ahead of the market's increase of 0.8 per cent.

Despite the growth, shares fell to a low of 685p before recovering slightly.

Read more: Greene King warns that Brexit could hurt pub industry after strong summer

Why it's interesting

Greene King, which operates 3,000 pubs, completed 50 brand conversions so far this year with an aim to reduce the number of brands and formats in the company. Most projects have been converting the under-performing Fayre and Square pubs to Hungry Horses, which created average sales uplifts of more than 30 per cent.

The pub operator has made strong progress on the integration of Spirit, which it bought last year. The company expects to deliver £30m by the year end and has a £35m target by the end of the 2018 financial year.

What Greene King said

Rooney Anand, chief executive officer, said all of the company's divisions reported profit growth and the synergy benefits from the integration have helped offset increased cost pressures from the national living wage and to meet high customer expectations.

Looking ahead, increasing levels of consumer uncertainty, further cost pressures and the changing dynamics of eating out mean the consumer environment is likely to become more challenging. However, we are confident that the strength of our brands, pubs, people and cash generation leaves us well placed to deliver another year of progress, value creation and returns for our shareholders.

Read more: Greene King posts strong yearly results - but warns on Brexit

What others said

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said normally investors would be cheering the pub company's results.

Unfortunately the outlook isn’t so rosy. Greene King expects the economy to weaken next year, with negative consequences for discretionary spending. Coming on the tail of the introduction of the national living wage, restrictions on European immigration could add further pressure to an already increased wage bill.

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