Greene King sinks as momentum worries outweigh sales strength

Greene King on Tuesday said that annual sales from its pubs beat market expectations following growth from drinks led local pubs, though its shares dropped amid analyst concern over slowing momentum.

For the year ended 28 April, the pub and restaurant operator and brewer said its Pub Company segment's like-for-like sales beat market expectations to rise by 2.9% following programmes to improve value, service and quality for customers, with the company's 1,000 drinks led local pubs leading the way with sales 4.6% higher than last year.

Sales for the last quarter were up 2.4% after strong Easter weather propelled it to a 4.6% increase in sales compared to the holiday weekend last year, aided by particularly strong trading from Chef & Brewer, which recorded LFL sales of 15.3%, the company said.

Meanwhile, the FTSE 250 traded company's Pub Partners segment, which consists of 1,200 UK pubs operated by independent licensees, saw net income for the 52 weeks climb 1.6% while LFL profit was down 1.4%.

Finally, total beer volumes from the Brewing & Brands segment were up 0.9% and own-brewed volumes were down 3.4% against a UK ale market that dropped by 4.2%, while the year also saw Greene King make progress with its debt financing programme, repaying £393m to slash 51% off a debenture related to its Spirit Pub Company,

Rooney Anand, chief executive of Greene King, said: "We have traded strongly this year and have returned to market outperformance. As I hand over to my successor Nick Mackenzie, I believe that, with our strong pub and beer brands, talented and dedicated team and high-quality estate, Greene King is well positioned to make further progress and continue outperforming the market."

Looking ahead, Greene King anticipated that current year full-year profit before tax, non-underlying and exceptional items to be between £244m and £247m, compared with £243.0m last year, as the company expects to limit net cost inflation this year to between £10-20m.

The company's share price suffered despite the positive looking update, with analysts citing weak comparative figures from last year due to the 'Beast from the East' and an apparent slowdown in momentum for the business.

RBC Capital Markets said that the 2.9% like for like sales growth in the Managed Pubs for the year suggested slowing momentum from the 3.2% run rate reported after 36 weeks earlier this year, while anticipated profit before tax, profit per pub and brewing volumes all fell short of its expectations.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Given the weather was hampering efforts last year, it’s unfortunate trading hasn’t been spectacular while the elements are in its favour. Investors are making sure it’s known that good isn’t necessarily going to be good enough, Greene King will need to follow up this set of results with a string of more positive numbers if we’re to believe it’s out of the woods."

Greene King's shares were down 6.93% at 644.60p at 1051 BST.