Greene King tipped for growth as Christmas Day diners boost brewer

Picture: Sean Bell
Picture: Sean Bell
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BELHAVEN brewer Greene King toasted record Christmas Day takings as customers chose to eat out last year, making up for a dip in sales of its beers.

Analysts tipped the hospitality group for further growth after it said in a trading update yesterday that like-for-like sales jumped by 3.7 per cent in the first three quarters of its financial year.

The firm – which owns chains including Hungry Horse and Loch Fyne restaurants along with the Belhaven brewery in Dunbar – opened 85 per cent of its 2,300 pubs on 25 December. That helped it build on last year’s record with a 6.8 per cent increase in takings for the day, to £2.7 million.

It sold 448,000 Christmas meals during December, helping food sales add 4.1 per cent in the 36 weeks to 6 January.

Beer volumes from the firm’s brewing and brands division fell 2 per cent in the period, which it said was a smaller decline than that suffered by the UK ale market as a whole.

Its two leading ales, Greene King IPA and Old Speckled Hen, were both ahead of last year following a marketing campaign.

Chief executive Rooney Anand said the firm’s “strong momentum” was maintained over the last six weeks.

“We achieved record sales through Christmas and the New Year as our teams once again delivered excellent value, service and quality to our customers,” he said.

“Pubs continue to play a vital role for customers, families and communities across the UK during the festive period, especially in this difficult financial environment.”

The group is on track to meet market expectations for a 7 per cent jump in profits to around £162m.

It said underlying earnings from its tenanted pubs division were up 4.2 per cent, after it disposed of 65 non-core sites in the period. Greene King has also opened 22 sites in the financial year to date, which it is managing directly.

Despite the improvement in trading, the firm warned that conditions for consumers are unlikely to improve much in 2013.

It added: “While this presents ongoing challenges for all consumer-facing businesses, we are confident that our strategy, tailored to the prevailing conditions, will continue to deliver sustainable earnings and dividend growth to our shareholders.”

Simon French, an analyst at stockbroker Panmure Gordon, said he shared the company’s caution over the UK economic outlook, but added: “The group’s well-positioned managed pub estate and resilient tenanted and brewing operations means it is well positioned to maintain its current growth rates.”

Douglas Jack, an analyst at Numis, said Greene King now faces relatively easy comparatives with last year in its financial fourth quarter.

He said the shares appeared fairly valued but was holding his “add” recommendation to reflect predictions of 8 per cent earnings growth, a 4 per cent dividend yield and “a reasonable trading backdrop for food-led residential pubs in 2013”.

Shore Capital has a “buy” rating on Greene King, and analyst Greg Johnson described yesterday’s update as “robust”. He said trading and growth opportunities remained attractive and should translate into high single-digit annual earnings growth over the medium term.