Greene King PLC (LON:GNK) saw its full-year profits fall, albeit due to exceptional items related to the integration of its Spirit Pub Co acquisition, with the brewer and pubs operators’ revenues rising thanks to a stronger fourth quarter
For the year ended April 30, the FTSE 250-listed firm said its pretax profit fell by 2.6% to £184.9mln, down from 189,8mln a year earlier, although after exceptional items were stripped out profits rose by 6.6% to £273.5mln.
READ: Watered down sales growth at Greene King
The company booked and exceptional and non-underlying item charge of £67.5mln, of which about £47.3mln related to integration costs for the Spirit acquisition and the settling of a £32.9mln of historic tax positions with HM Revenue & Customs.
Greene King saw its full-year revenues rise 6.9% to £2.2bn, up from £2.07bn a year earlier, driven by a "good Christmas, a stronger fourth quarter, an impressive performance from our wet-led local pubs and a 4.1% increase in the average number of pubs trading".
CEO expects challenges to intensify over the next few years
Greene King’s chief executive Rooney Anand said: "Our performance has been achieved against a demanding backdrop of increased costs, weaker consumer confidence and increasing competition.
“While I expect these challenges to intensify over the next few years, Greene King has a very strong track record of delivery in tough market conditions,"
The company is recommending a final dividend of 24.4p, giving a total payout for the year of 33.2p, up 3.56% from last year’s 32.05p.
Shares ease back
In late morning trading, Greene king shares were 0.7%, or 4.5p lower at 684p.
Nicholas Hyett, equity analyst at Hargreaves Lansdown said “while the acquisition of Spirit pubs has done wonders for the business, it also increased the group’s exposure to the casual dining market, and that’s an industry which looks under pressure. “
He added: “Competition is fierce and the combination of rising wages and weak sterling has set costs creeping upwards. Weaker names in the sector are already struggling.
“Greene King has a couple of things in its favour. The balance sheet is packed with freehold pubs, supporting cash generation, while the ongoing project to switch weaker Spirit branded pubs into the better performing Greene King formats is generating some very impressive results. Together, these should help the group weather any storms that are brewing.
“A slowdown in the UK economy would still be unpleasant though.”