Greene King and Spirit rise above Games ‘disruption’

FOOD sales helped pub operators Greene King and Spirit to shrug off “disruption” caused by the Olympic Games and post rising sales over the summer.

Greene King – which owns the Belhaven brewery in Dunbar along with chains including Hungry Horse and Loch Fyne Restaurants – reported a “reassuring” 5.1 per cent rise in underlying sales for the past 18 weeks.

The Suffolk-based group said the Olympics had a minimal overall impact, with quieter trading in central London offset by a stronger performance in the city’s suburbs.

Spirit Pub Company – the owner of the Chef & Brewer and Fayre & Square brands – told a similar story yesterday, with sales at its managed estate up 4.1 per cent in the 12 weeks to 18 August. Mike Tye, chief executive of Spirit, which operates 1,300 pubs following its demerger from Punch Taverns last summer, said: “We have finished the year strongly, despite challenging trading conditions created by the poor summer weather and the disruption caused by the Olympic Games.”

He added that its managed estate performed “significantly” ahead of the market and warned the consumer environment remains tough.

Spirit said it had reduced the value of its estate of pubs by £500 million to £1.3 billion because the majority were on its books at acquisition cost.

Meanwhile, Greene King said its performance was “encouraging” although it warned that consumer confidence will remain subdued. Sales of Greene King’s India pale ale (IPA) were boosted following a £4m relaunch in April, while Old Speckled Hen also witnessed strong growth.

Investec analyst James Hollins said Greene King had proved its credentials as a quality pub operator during 2012, helped by having a large number of its sites in London and the south-east of England, which have been more resilient since the downturn.

He increased his pre-tax profit forecast for the year to April from £143.6m to £160.6m.

Spirit said it had been another “challenging” quarter for its estate of 500 leased pubs, with like-for-like net income down 5.4 per cent, although this was an improvement on the 8 per cent fall in the previous quarter. Numis analyst Douglas Jack expects Spirit’s profits for the year to 18 August to rise 16 per cent to £51.1m.

He also predicts like-for-like profits in the leased estate will start to stabilise in the second half of the current year, as Spirit benefits from the sale of underperforming pubs and renegotiated rents.

Greg Johnson, an analyst at Shore Capital, added: “We continue to view the managed pub sector as an attractive investment area, highlighting the ‘affordable treat’ thesis, improving operating returns and balance sheet metrics.”

Shares in Greene King gained 10p to 573.5p, while Spirit dipped 1.5p to 55.5p.