Bumper sales but Greene King faces new year hangover

Belhaven-owner Greene King has reported record half-year revenue topping £1 billion, but warned of a “more challenging” consumer environment as regulatory costs and weaker economic growth hit the industry.

Group revenue rose 13.8 per cent to £1.04 billion in the 24 weeks to 16 October, boosted in part by the ahead-of-schedule integration of its newly acquired Spirit Pub Company.

Greene King, which brews beers like Old Speckled Hen and Belhaven Best, bought the rival company in a deal worth £774 million last year, creating one of the largest pub groups in Britain. It also helped statutory pre-tax profit rise 9 per cent to £92.5m.

However, the company said both economic and regulatory challenges could hit the balance sheet.

The pubs group and brewer said it was working with trade organisations to urge the UK government to offset some of the impact from initiatives like National Living Wage, National Minimum Wage, Apprenticeship Levy and proposed increases to business rates, which are expected to have an impact on costs and margins.

Those cost pressures could heap further pain on top of the effects of a weaker economy and softer discretionary spending in the wake of the Brexit vote.

Chief executive Rooney Anand said: “The full impact of the UK decision to leave the EU remains unclear. Looking ahead, increasing levels of consumer uncertainty, further cost pressures and the changing dynamics of eating out, mean the consumer environment is likely to become more challenging.

“However, we are confident that the strength of our brands, pubs, people and cash generation leaves us well placed to deliver another year of progress, value creation and returns for our shareholders.”

Nicholas Hyett, an equity analyst at brokerage Hargreaves Lansdown, said: “In normal circumstances investors would be cheering Greene King’s results this morning.

“Revenue is at a record high, while the Spirit integration is delivering synergies ahead of schedule and the decision to simplify the brand portfolio is boosting performance.

“Unfortunately the outlook isn’t so rosy. Greene King expects the economy to weaken next year, with negative consequences for discretionary spending. Coming on the tail of the introduction of the National Living Wage, restrictions on European immigration could add further pressure to an already increased wage bill.

“Spirit still offers the group plenty of self-help options, but the group clearly see a possible hangover looming.”

Greene King employs some 43,000 people and operates more than 3,000 pubs, restaurants and hotels across England, Scotland and Wales.

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