Greene King surges as Spirit Pub integration boosts interim profit

Pub operator Greene King posted a rise in first half pre-tax profit and revenue thanks in part to the integration of Spirit Pub Company.

For the 24 weeks to 18 October, statutory pre-tax profit increased 17.9% to £84.9m as revenue surged 49.2% to £917.7m.

Chief executive officer Rooney Anand said: “It has been a strong first half, with the Greene King business strengthening and significant progress made in the Spirit integration. Like-for-like sales growth in Greene King Retail improved during the half and both Pub Partners and Brewing & Brands delivered profit growth and margin expansion.

“We completed the acquisition of Spirit Pub Company and, by combining the best of both companies, made good progress in capturing value from the acquisition and creating the UK's leading pub hospitality company.”

Greene King, which completed the acquisition of Spirit Pub on 23 June, lifted its interim dividend by 6.3% to 8.45p per share.

In addition, the group said it now expects to exceed its initial guidance on cost synergies of £30m and raised the synergy target to £35m.

The company said like-for-like sales were up 2%, while LFL sales at the Spirit Managed estate were 1.2% higher.

Greene King added that it is confident of being able to mitigate most of the impact from the introduction of the national living wage, which will affect its cost base.

It said options include enhanced labour scheduling and improving labour utilisation across the whole day. It expect the benefits of mitigating actions to be fully achieved in 2018/2019.

Canaccord Genuity, which rates the stock at ‘buy’, said: "The song goes that the first step is the hardest but Greene King has made it look easy with an excellent interims statement this morning.”

“All metrics are better than we expected, the integration is ahead of plan and synergy guidance has been raised.”

Keith Bowman, equity analyst at Hargreaves Lansdown said the newly-combined pub company has made an impressive start.

“Cost savings in relation to the takeover of Spirit have been raised, trading at both Greene King and Spirit has proved robust, whilst management is confident in its ability to mitigate most of the increased cost from the new and coming national living wage,” he said.

At 1210 GMT, Greene King shares were up 9.4% at 931.50p.