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Morning Briefing for pub, restaurant and food wervice operators

Fri 6th Sep 2019 - Update: Greene King trading, calls for alcohol duty reforms
Greene King reports like-for-likes up 1.5% in past seven weeks: Brewer and retailer Greene King has reported like-for-like sales growth of 1.5% in the past seven weeks. In a first-quarter trading update for the 18 weeks to 1 September ahead of its annual general meeting today (Friday, 6 September), the company also said it expected to dispose of between 85 and 95 pubs in the financial year and open eight sites. Greene King stated: “Like-for-like sales in (managed) Pub Company grew 1.5% over the past seven weeks and, on a two-year basis, were up 2.4%, demonstrating the continued momentum in Pub Company as a result of our ongoing focus on improving value, service and quality. Like-for-like sales were down 1.8% for the first 18 weeks, reflecting the tough comparatives of last year’s successful Fifa World Cup and good weather. On a two-year basis, like-for-like sales for the first 18 weeks were up 1.0%. Like-for-like net income in Pub Partners was down 4.2% for the first 16 weeks, driven by softer like-for-like beer sales following last year’s comparatives. In Brewing & Brands, total beer volumes were down 6.5% for the first 18 weeks and own-brewed volumes were down 7.9%. We are on track with our cost mitigation programme and expect to limit net inflation this financial year to £10 to £20m. We also continue to make progress on our refinancing programme and in June we prepaid the remaining £93m Spirit A4 bonds. We remain on track with our disposal programme and expect to dispose of 85 to 95 pubs this year, generating disposal proceeds of £45m to £55m from which we will fund the opening of eight new pubs. On 19 August, Greene King announced a recommended cash acquisition for the company by CK Noble (UK). Under the terms of the acquisition, each Greene King shareholder will be entitled to receive 850p in cash. In addition, the acquisition allows for the distribution of the previously announced final dividend for the 52 weeks ended 28 April of 24.4p per Greene King share to be paid (subject to approval by Greene King shareholders at today’s annual general meeting) on 13 September to Greene King shareholders on the register as at the close of business on 9 August.”
Think tank calls for alcohol duty reforms and licensees to be given ‘Pub Relief’: Licensees should be allowed to claim back a proportion of alcohol duty through a new “Pub Relief”, a think tank has said in a report that explores the case for reforming alcohol duty in the UK. The Social Market Foundation said such a scheme would focus alcohol duty on the off-trade, which is “particularly reliant on sales to hazardous and harmful drinkers”. The foundation said the existing duty rules were inconsistent and unfair, and made drinks such as high-strength cider unjustifiably cheap. Introducing “Pub Relief” was one of five recommendations in the report to “better focus alcohol taxation on where health and other social harms are greatest” after Brexit. It said of the proposed “Pub Relief” scheme: “Conceivably, this could work in a similar way to Alcoholic Ingredients Relief, which already exists. With Alcohol Ingredients Relief, businesses can claim relief on alcohol excise duty when they use alcohol as an ingredient in drinks less than 1.2% ABV, chocolates, vinegar and other foods for human consumption (below a certain alcohol content).” The report also said the cost of beer should be cut by 26p a pint and a glass of wine by a similar amount. The foundation is proposing a shift in the burden of taxation towards high-strength drinks bought for consumption at home, and away from weaker products bought in pubs. At present the alcohol in a 6% cider is taxed at 7p per unit, but a low-strength wine, also at 6% alcohol content, incurs 50p per unit. Under the proposals the price of a glass of wine in a pub would be cut by 6.1% but a bottle of wine bought from a shop would go up by 5.8%, adding 35p to the average cost. A pint of beer in a pub would be 7.1% cheaper but beer from supermarkets would rise by 4.6%. The biggest change would be on the cost of high-strength cider. A 2.5-litre bottle at 7.5% costs £3.70, but under the new formula would be £7.37. Scott Corfe, the think tank’s research director and author of the study, said: “Alcohol should be taxed on the basis of evidence, not politics.”

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