World Cup and warm weather revive Greene King sales

The World Cup and the arrival of summer weather have helped revive sales at Greene King after squeezed household budgets and rising costs drove profit down in the brewer and pub operator’s last financial year.

Adjusted pre-tax profit for the year to the end of April fell 11.2% to £243m as revenue declined 1.8% to £2.18bn. Pub like-for-like sales fell 1.2% excluding the impact of snow in March but have revived to show a 2.2% increase in the last eight weeks.

Investors were unconvinced by the apparent improvement in the company's performance, sending Greene King shares down more than 10% in early trading. At 10:04 BST the shares were down 8.3% 585.5p.

Greene King said trading last year was tough amid weak consumer confidence, increased competition and “unprecedented cost inflation”. Household spending has been constrained by falling real incomes and competition has intensified due to a glut of casual dining chains.

The company is cutting costs but those efforts will be outstripped this year by cost pressure from the National Living Wage, the sugar tax, utilities and business rates even as customers demand more for their money. Greene King said it expected to cut £30-35m of spending this year and to be hit by £45-50m of cost rises.

Rooney Anand, Greene King’s chief executive, said efforts to improve service and food, including more regular food checks and linking staff incentives to online reviews, had started paying off in the second half of the year.

Anand said: “Our investment to improve the customer experience in our pubs and the focus on our strategic priorities is beginning to pay off. Positive momentum, both in terms of trading and customer satisfaction, is returning to our business.

"While it is still early days, this positive momentum has continued into the new financial year, aided by good weather and popular sporting events.”

Sunnier weather helped attract more people to pubs in May, driving a 3.5% surge in like-for-like sales across the industry, a recent survey showed. Greene King is also benefiting from the Fifa World Cup, which sends many fans to their local pub to watch matches.

The main attraction is England, who play their last group game on 28 June against Belgium having qualified for the knockout stage. Analysts at Berenberg said Greene King would be the biggest winner from the World Cup among pub companies, especially if England do well, because football is a big feature at its managed premises.

Russ Mould, investment director at AJ Bell, said Greene King's performance last year compared badly with rivals Fuller's, where revenue rose 5%, and Young's, whose sales rose 3.9%.

Mould said: "Yes, competition is tough in the casual dining industry, but consumers are still choosing to eat out at destinations where they see good value. The recent sunny weather should have helped all pub companies but management at Greene King can’t rely on a few good weeks to revive earnings growth."

Canaccord Genuity analyst Nigel Parson, who rates Greene King shares as 'hold', was more forgiving. He said the company was scrapping unwanted brands and reorganising its pubs after buying rival Spirit in 2015 and that cost inflation was starting to ease.

Parson said: "Greene King is enjoying a good start to the year … We are not overwhelmed with euphoria but the hot weather and England's serene progress (so far) in the FIFA World Cup is helping. Greene King is now cautiously optimistic and that also neatly summarises our view."