BELHAVEN-OWNER Greene King posted a near-50 per cent hike in profits yesterday as customers flocked to its much-enlarged casual pub dining offering following its £774 million takeover of rival Spirit Pub Company earlier this year.
The group, which brews ales such as Belhaven Best and Old Speckled Hen and now has more than 3,000 outlets, has used the acquisition to boost its extensive network of food-led outlets.
However, Greene King revealed that it would halve the 20 brands and formats it currently runs to focus on those with most profit potential, and upgrade between 300 and 400 pubs, over the next three years.
Like several of its peers, Greene King has switched much of its focus from tenanted and leased pubs, where drinks make up a larger proportion of sales, towards more food-focused establishments, with better profit margins. GK’s margin now stands at 19.6 per cent.
The group also lifted its costsaving synergy guidance regarding the Spirit acquisition to a target of £35m, up from £30m.
The pub/brewer said that underlying pre-tax profits jumped 46.9 per cent to £121.3 million during the 24 weeks to 18 October.
Revenues leapt 49.2 per cent to £917.7m, boosted by the acquisition, with like-for-like retail sales rising 2 per cent.
Beer volumes at GK, which also brews Abbot Ale, rose 3.6 per cent in the period. The City was impressed, marking the shares up by 13.1 per cent or 111.5p to 963p.
Rooney Anand, chief executive of GK, whose outlets include Doctors in Edinburgh and Blue Stane in St Andrews, said: “It has been a strong first half, with the Greene King business strengthening and significant progress made in the Spirit integration.
“Like-for-like sales growth in Greene King Retail improved during the half and both Pub Partners and Brewing & Brands delivered profit growth and margin expansion.”
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, commented: “The newly combined pub company has made an impressive start.
“Cost savings in relation to the takeover of Spirit have been raised, trading at both Greene King and Spirit has proved robust, whilst management is confident in its ability to mitigate most of the increased cost from the new and coming national living wage.
“The Spirit integration is ahead of plan, with over 90 per cent of Spirit managed pubs now selling Greene King IPA, and digital initiatives in the GK estate have led to an 18 per cent increase in online table reservations,”
Anand said that despite increased consumer confidence it had yet to be fully reflected in the UK eating and drinking out market, with “larger-ticket and other discretionary items” bigger beneficiaries of a return to real income growth.
GK’s chains include Chef & Brewer, Fayre & Square, Flaming Grill, John Barras, Taylor Walker, Loch Fyne Seafood and Farmhouse Inns.