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Thu 29th Nov 2018 - Update: Greene King and Britvic results
Greene King reports Pub Company like-for-likes up 2.7% in first half: Greene King has reported like-for-like sales in its managed Pub Company division increased 2.7% in the 24 weeks to 14 October 2018. It said the performance was driven by the ongoing benefits from its investment in value, service and quality (VSQ), strategic focus on four core brands, and boosted by good weather and the Fifa World Cup. Like-for-like net profit in the tenanted Pub Partners was down 1% with total sales falling 1.3% to £90.9m due to 4.6% fewer pubs trading year-on-year. Brewing & Brands revenue rose 7.5% to £110.0m. Total revenue for the group increased 1.9% to £1,051.2m while adjusted profit before tax was up 0.2% to £128.2m. Pub Company like-for-like sales were up 2.9% at week 30 while Pub Partners and Brewing & Brands were “performing in line with expectations”. The company said Christmas bookings were “well ahead of last year” and it remained on track to limit full-year net cost inflation to £10m to £20m. The company added: “Pub Company delivered total sales of £850.3m, up 1.6% from 2.4% fewer pubs. Average weekly takings per pub were £20,600, up 4.0%, reflecting the programmes in place to improve underlying sales, as well as the good weather and the successful World Cup. Like-for-like sales were up 2.7%, driven predominantly by higher drink volumes. Pub Company operating profit was £134.2m, down 2.0%, and the operating profit margin was 15.8%, down 0.6%, due to cost inflation, the implementation of the VSQ investment programme in the second half of last year and the phasing of cost mitigation plans during the year. Pub Partners revenue was down 1.3% to £90.9m due to 4.6% fewer pubs trading year-on-year. Like-for-like net income was ahead of last year, driven by higher like-for-like rental income as well as increased like-for-like drink sales. Pub Partners operating profit margin was down 1.8% and like-for-like net profit was down 1.0%, due to higher central costs, including one-off legal costs relating to a legal challenge to the Pubs Code Adjudicator. Brewing & Brands revenue was up 7.5% to £110.0m following the good summer weather and the World Cup. Operating profit was up 1.4%, while the operating profit margin was down 0.9% due to mix, with an increased sales contribution coming from third party beers. Free cash flow, which is reported before disposal proceeds, was £25.4m, up £14.8m due to reduced tax and interest payments, and our operating cash over the past 12 months more than covered our scheduled debt repayments, core capital expenditure and dividend payments. Proceeds from the disposal of 40 pubs and 13 other properties were £30.7m, from which we funded three new builds and two single site acquisitions. Adjusted earnings per share were up 0.3% to 33.1p and the board has recommended a half-year dividend per share of 8.8p, in line with last year. The business generated a strong return on capital expenditure of 8.5%, which remains comfortably above our weighted average cost of capital. Our returns on investment for core development capex were more than 30% and the net asset value per share was £6.88. As part of the Spirit debt refinancing programme, we carried out an estate revaluation which indicated a market value of £4.5bn, versus a book value of £3.6bn.” In the Pub Company estate, the company disposed of 16 sites during the period, generating income of £5m, and opened three new builds and completed one single site acquisition. In addition, it transferred four pubs from Pub Company to Pub Partners and four pubs from Pub Partners to Pub Company. In Pub partners, the company disposed of 24 non-core pubs over the period, raising £25m. In terms of the Market Rent Only option, Greene King said five agreements were in place and it expected one further agreement in the second half of the year. Chief executive Rooney Anand said: “We have seen continued positive momentum in Pub Company, which was sustained beyond the boost of the World Cup and the summer weather. The hard work of our teams, combined with the investments we made to improve our customer experience, is driving sales outperformance to the market. We remain highly cash generative, meeting our debt repayment requirements, investing in our pubs and paying an attractive, sustainable dividend out of operating free cash flow. Good progress was made refinancing the Spirit debenture, which will reduce the cost of our debt and increase the strength and flexibility of our balance sheet. Looking forward, Christmas bookings are up on last year and we look forward to ensuring customers have a great time celebrating the festive season in our pubs. Ongoing uncertainty around Brexit may impact on consumer confidence, but as a team we are focused on our key strategic priorities and remain confident of our outlook for the financial year.” Meanwhile, Greene King has partnered with Coca-Cola for the ninth year running to offer a free soft drink for designated drivers at Christmas. More than 1,000 Greene King pubs will take part in the festive anti drink-drive campaign, which runs until last orders on Tuesday, 1 January. Drivers will receive a voucher to use on their next purchase when they buy any 330ml bottles of Coca-Cola, Diet Coke, Coca-Cola Zero Sugar or Appletiser. Chief commercial officer Phil Thomas said: “As a leading pub company, we have an important role to play in helping to promote responsible drinking. Once again, our pubs up and down the country are offering free soft drinks during Christmas as we enter almost a decade of the Designated Driver Campaign with Coca-Cola.”
Britvic reports full-year revenue up 5.1%: Britvic has reported revenue increased 5.1% to £1,503.6m with organic revenue up 2.7% for the 52 weeks to 30 September 2018. Adjusted Ebit increased 5.4% with organic adjusted Ebit up 4.0% to £206.0m. Profit after tax was up 4.9% to £117.1m. Chief executive Simon Litherland said: “We have delivered a strong performance in a challenging environment, with good revenue, margin and earnings growth. I am delighted we have grown our stills brands, demonstrating that our investment in innovation and marketing is beginning to pay off. The investment in the transformational business capability programme is now nearing completion and is already delivering significant efficiency and commercial benefits. Free cash flow will increase materially in 2019 as capital spend falls back towards normal levels. Britvic has consistently demonstrated that we are a strong, agile business, operating in a resilient category. In 2019 we have exciting plans for our portfolio of leading brands across our markets. While political and economic uncertainty will undoubtedly continue, we are confident we will continue our long-term track record of growing earnings, dividends and shareholder value.” Of the UK market, he added: “In a turbulent market we have successfully executed our commercial plans, growing our carbonates and stills portfolios and gaining market value share. The GB soft drinks market (as measured by Nielsen) has continued to grow this year, in both volume and value, with the second half of the year particularly strong, benefiting from the exceptional summer weather. As we anticipated, the introduction of the soft drinks industry levy and our transparent approach of differential pricing has accelerated the consumer trend of switching away from higher sugar drinks into low and no sugar alternatives. This has benefited our broad portfolio of low and no sugar brands, with Pepsi MAX, Robinsons, 7UP Free, J2O and Tango all in revenue growth. We remain confident in our approach to the levy and believe the continued evolution of consumer trends offer us further opportunities for growth. This year, we leveraged the strength of the Robinsons brand with the introduction of new premium ranges, Creations and Cordials. These have been a success, growing both the brand and the squash category. We have also gained market share and expanded penetration by increasing the number of households buying the brand. J2O has benefited from an upweighted marketing campaign, increased feature and display in store and growth in the sparkling Spritz variant. Fruit Shoot declined this year, primarily due to continued competitive pressure and a decision to focus on value by reducing the number of price promotions. As part of our ongoing brand rejuvenation plan, we have launched a new 50% juice variant, called ‘Juiced’, which is all natural and has school compliance accreditation, and a sparkling water variant. We also maintained our focus on increasing our presence in categories that are small today but offer long-term growth potential, including the launch of Aqua Libra, a sparkling unsweetened flavoured water, and we continued to invest in Purdey’s, our natural energy offering. We highlighted in our third quarter trading statement that performance in the second half of the year was disrupted by the shortage of carbon dioxide across western Europe, which limited the production of carbonated soft drinks. We were unable to capitalise fully on the hot weather in July and August as we navigated the carbon dioxide shortage, but have now successfully recovered, as evidenced by Pepsi regaining significant market share in September.”

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