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Wed 19th Aug 2020 - Exclusive: Greene King reports trade back to 80% in like-for-like terms, city centre trading ‘extremely difficult’
Exclusive – Greene King reports trade back to 80% in like-for-like terms, city centre trading ‘extremely difficult’: Brewer and retailer Greene King has reported its sales have made steady progress since reopening and are now circa 80% of the same period last year. Chief executive Nick Mackenzie told Propel that Eat Out To Help Out had produced a “step-change” in company like-for-likes after steady improvement through July. A company survey has shown 27% of customers using Eat Out To Help Out had come out for the first time since lock-down, helping the company serve 1.9 million people in the first six days. Mackenzie said: “We are pretty pleased on a number of levels – trading has been better than expected in the first six weeks and Eat Out To Help Out has provided a massive boost. Customer feedback has also been really strong – we have been getting our best ever net promoter scores for example.” He also reported a huge increase in downloads of its order and pay app, which have now reached 2.1 million. However, Mackenzie stressed the huge challenges faced by city centre pubs, particularly in London, where trade is “extremely difficult”. Greene King has almost 60 out of 95 pubs in the centre of London open and trade is 60% down in like-for-like terms. Even with the boost of Eat Out To Help Out, like-for-likes sales were 40% to 50% down, Mackenzie said. “We need urgent action to get people back into city centres,” he added. Suggestions for government include subsidising public transport, increasing financial support for businesses and extending the Eat Out To Help Out scheme in a targeted way for city centres. Mackenzie said Greene King would continue to keep its existing estate of central London pubs open but would eventually need to “take a view” if nothing changes. In a Companies House full year results filing, Greene King has also unveiled a new strategy for a post-covid world. The new strategy will focus on growing sales through compelling brands and the key role pubs play in communities. It stated there would be an 
increased focus on the customer experience and modernisation with investment in digital innovation. It has launched a new company “purpose” – We Pour Happiness into Lives – “putting customers at the heart of the business, investing in team members and transforming the culture”. The company will also have an increased focus on takeaway and delivery. Mackenzie told Propel the company had made a good start with 1,400 sites offering takeaway and 400 providing delivery. He added: “We are seeing some very strong results in certain locations.” Of acquisitions and estate development, he said: “The estate is quite value-led so our strategy is about how we get the most value from existing assets through more premiumisation. Acquisitions and bolt-ons are not our number one priority but never say never.” In full-year results submitted to Companies House, Greene King reported an exceptional charge of £45m in relation to covid-19 including stock write-offs and debt provisions – a further cash cost of £15m to £20m is expected to reopen its estate. Group revenue was down 13.4% to £1,919m in the financial year to 26 April 2020. Its managed Pub Company was worst hit by covid-19, with revenue down 13.5% to £1,556.2m. Group underlying operating profit before exceptional and non-underlying items was down 31.3% to £253.1m. The company said it suffered 37 consecutive non-trading days in the its financial year to 26 April 2020. It added: “The two weeks prior to the lock-down saw steadily deteriorating nationwide trade as official guidance and public mood encouraged more social distancing. Brewing (was) maintained for off-trade outlets – some pubs continued to operate, where possible, offering takeaway via Deliveroo and Just Eat as well as click and collect. 99% of pub staff were furloughed as part of the government's Coronavirus Job Retention Scheme. The chief executive took a voluntary pay cut of 50% while pubs were closed, with other members of the leadership 
team taking voluntary reductions of up to 30%. 
A team member support fund (was) launched, providing grants to people facing financial hardship. Almost £300,000 of food (was) donated to food redistribution charities. A support fund launched for tied tenants with financial support on rent and free replacement stock for out-of-date beer and cider. Although certain of the group's credit metrics have deteriorated as a result of the reduced trade arising from the covid-19 virus outbreak, the group's liquidity position remains strong reflecting the resilience of the group's capital structure. The Greene King secured vehicle had a free cash flow debt service cover ratio of 1.4 times at the year end, giving 21% headroom. The Spirit debenture vehicle had a free cash flow debt service cover ratio of 2.2 times giving 41% headroom. The group's average cash cost of debt reduced to 5.5% from 5.8% last year.” Of the most recent financial year, it added: "In the first nine months of the year Greene King performed below the market in terms of like-for-like sales in our managed pub business, and broadly in line with the market in the tenanted pub business. Actions were being taken in both businesses to address the issues. At the beginning of the year there were more than 300,000 eating and drinking out outlets in the UK. All were closed in March 2020 as a result of the covid-19 pandemic. It is, yet, unclear what the impact of the covid-19 crisis will be on the wider market. There have already been several high-profile cases of companies going into some form of administration. It is also unclear whether and if so, how consumer behaviour will change following the covid-19 pandemic and the easing of the lock-down restrictions. We believe there will be opportunities for dynamic pub operators such as Greene King to benefit from the market turmoil. Prior to the lock-down we were already working on a range of strategic projects designed to ensure that we were well placed to meet changing consumer demand, with increased focus on experiential offers, healthy food and drink options and sustainability, as well as drink premiumisation (as demonstrated by the growth of gin-based drinks) and digital innovation. A key part of the company's plans has been to ensure consumers have greater choice and convenience through delivery and mobile payment platforms. These will sit alongside the ongoing focus on improving the value, service and quality of our offers, targeting volume-led sales growth and improving brand loyalty.”

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