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Thu 3rd Jul 2014 - Greene King reports results, updates on strategy
Greene King hails fourth year of record results: Greene King this morning hailed a fourth year of record results across its brewing and pub businesses, with total revenue up 6.9% on a 52-week basis, and profit before tax up 7.4%. Its managed Retail division's like-for-like sales in the 53 weeks to 4 May were up 4.1%, with food like-for-like sales up 5.0%. Average ebitda per pub rose 5.2% in its tenanted Pub Partners division, while core like-for-like net income was up 2.2%. The Brewing and Brands division saw core own-brewed volume climb 4.6% with profits up 1.3%, as the company's volume share of the UK ale market rose 70 basis points to 11.3%. Rooney Anand, Greene King's chief executive officer, said: "We have delivered four years of record results since the credit crunch and maintained this momentum over the last 12 months by giving our customers what they want, in the right way and at the right price. Profit growth of 12% in our largest business, Retail, was driven by strong like-for-like sales growth and by newly-acquired sites. Pub Partners and Brewing and Brands also performed well. As a result, we achieved strong earnings, ROCE and dividend growth for the year." Anand said there were now  "clear signs" that both the UK economic outlook and consumer confidence were improving, although consumers continue to spend cautiously. "We see the pace of change in how people eat and drink out of home quickening and so we are shaping the business for the future to benefit from the opportunities these changes will bring," he said. For the full 53 weeks, total revenue was up 8.9% to £1.3bn, with operating profit up 7% to £265.6m. The operating margin slipped 0.5 percentage points to 20.4% compared to the 52 weeks of 2012/13. During the year Greene King sold or transferred to its Retail division 148 sites, taking the Pub Partners estate down to 1,165 sites, below its strategic target of 1,200 sites. The total proceeds raised from disposals in the year were £38.4m, in line with book value, the company said. As a results the Retail division grew its share of revenue to 74%, up from 72%. Since the year-end, it has sold 275 non-core Pub Partners pubs to Hawthorne Leisure for £75.6m. Operating profit margins in the 1,007-pub Retail estate were up 0.1 percentage points to 19.5%, with average ebitda per pub up 5.4% on a 52-week basis, to £235,000 for the full 53-week year. The company spent more than £70,000 a time on development projects at 126 sites, or 12%, of the estate, and those developments achieved an annualised ebitda return of 30%. On the brewing side, Old Speckled Hen, the UK's number one premium ale brand, grew 12.9% by volume against a premium ale market up 5.7%. Greene King IPA volume fell slightly because of lower tenanted and leased volumes, however.

Greene King identifies key trends: Greene King has outlined the key trends it sees a shaping the UK market. The company said: "We have taken steps already to get even closer to our customers and to understand their behaviour. For example, we increased investment in our digital platform and we launched the Greene King Leisure Spend Tracker during the year, reporting monthly GB household spending on eating out, drinking out and other leisure activities. Customer behaviour is increasingly dynamic, presenting constant challenges to the industry. Consumers are going out less but when they do they are demanding more choice and more control over what they eat and drink. Increasingly, they also like to treat themselves to more premium products. We responded to these trends by broadening our offering in key drinks categories such as premium lager, craft ale, wine and cider, and by offering increased customisation on our menus. Customers are also demanding higher quality, more healthy options and better consistency in what they eat and drink. We carried out two benchmarking exercises on key menu items to ensure we stay ahead of our competitors. As a result, we redesigned our burger offer, upgraded the quality of our steaks and added a number of healthier dishes to our menus. Importantly, we continue to win awards for the quality of our fish and chips, still our customers' favourite dish. People are still looking for value and we saw an increase in the share of our sales from promotional activity, especially in food. In Loch Fyne Seafood & Grill, we increased communication of our offers through electronic direct mailing to our extensive customer database, while across Retail we broadened the number of sites with known value item pricing on lager. In addition to addressing current trends, we have been working closely with the Trajectory Partnership, a leading consumer insight and futures consultancy, to analyse and identify forthcoming consumer trends in order to get a clearer understanding of how eating out and drinking out might change between now and 2025."
The main trends Greene King has identified include:
1 "Vertical families" – indicates the rising importance of inter-generational leisure occasions.
2 "Digitalisation of leisure" – the increase in use of and access to technology in leisure.
3 "Value hunters" – demonstrates that cost of living is likely to remain a central consumer issue.
4 "Deregulation of life" – where different activities are less associated with specific times of day.
The implications of these trends for the business, it said, were "significant" and included the need to:
Develop sites and offers that cater for different generations at the same occasions.
Continue investing in its digital platform and its training programmes to meet the challenges of a more demanding consumer, providing instant feedback to other customers.
Maintain focus on delivering great value for customers, even as the economy improves.
Make its sites more convenient for customers by increasing the occasions they use Greene King pubs by expanding its daytime offer and becoming less reliant on "traditional" pub eating and drinking occasions.
Using the analysis of current and future consumer trends to evolve the current strategy to accelerate its Retail division's expansion and to move beyond conventional pub offers.
Specifically, its future strategy will focus on six key elements:
1 Open a minimum of 30 new Retail sites a year
2 Reposition and simplify the existing Retail estate to optimise growth and returns
3 Further improve value, service and quality to its customers
4 Investigate options to diversify the Retail offer including potential acquisitions
5 Reduce Pub Partners to 750 sites
6 Maintain investment in Brewing and Brands to drive market outperformance.


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