UK pub operator Greene King PLC (LON:GNK) is expected to reveal a decline in first half profits on Thursday as the industry tackles higher wages and inflation.
In September the company warned that sales at the pubs it directly manages dropped 1.25 due to “unprecedented industry cost pressures”.
Such cost pressures include an increase in the minimum wage, the apprenticeship levy and rising inflation.
A slump in the pound since the Brexit vote has pushed up import costs. But increases in supplier prices have become more difficult to pass on to drinkers since sales have suffered due to consumers being squeezed by rising inflation and weak wage growth.
Greene King is expected to report adjusted pre-tax profits fell more than 8% in the first half to £127mln and revenues came in at just over £1bn.
The company said in its last trading statement that it remains cautious about the trading environment and expects the challenges of weaker consumer confidence, increased costs and fierce competition to persist over the near-term.
Cost control supports Marston's full year profits
Fellow pub operator Marston’s full year figures will also be closely eyed given the recent signs of weaker consumer sentiment.
In an pre-close trading update in October, Marston's said its full year sales and profits were ahead of last year and is targeting further growth in 2018.
It said its "disciplined approach to pricing and promotions and good cost control" helped to offset cost pressures. The group has identified cost savings of about £5mln per year.
The results from Marston's and Greene King follow disappointing trading news from All Bar One and Harvester pubs and restaurants owner Mitchells & Butlers PLC (LON:MAB).
Mitchells last Thursday reported a drop in full year profits and said it was unlikely to pay an interim dividend.
Barclays said this has prompted questions on whether Greene King and Marston's will follow suit with their dividends. But the bank believes Greene King and Marston's have a “significant advantage” over Mitchells.
"Firstly, Mitchells has a significant cash outflow of £46mln given its pension deficit. Secondly, securitisation amortisation payments are proportionately lower at Greene King and Marston's, creating further cash flow headroom," the bank said.
"We do not change our dividend forecasts in this research, as we expect both companies will be minded to pay dividends, but we believe Greene King's cash flow is stronger than Marston's."
MailOnline continues to save Daily Mail
The MailOnline continues to keep Daily Mail and General Trust PLC’s (LON:DMGT) head above water as print advertising declines and raw materials costs rise.
The DMGT reports its full year results on Thursday.
In an update for the 11 months to the end of August, it said while its full year guidance remains unchanged, pre-tax profit is seen towards the lower end of market expectations.
DMGT said print advertising revenue for the Daily Mail and Mail on Sunday newspapers fell 11% during the 11-month period but the MailOnline website saw advertising grow 22%.
Its Risk Management Solutions business, which targets the global property and casualty reinsurance industry, delivered flat revenue.
Investors will be looking out for an update to its strategic review, including the identification of which businesses and sectors merit further investment.
Significant events expected:
Trading update: Go-Ahead Group PLC (LON:GOG)
Interims: Greene King PLC (LON:GNK), Paypoint PLC (LON:PAY), Torotrak plc (LON:TRK)
Finals: Daily Mail & General Trust PLC (LON:DMGT), Grainger PLC (LON:GRI), Marston’s plc (LON:MARS), On the Beach Group PLC (LON:OTB), Premier Asset Management PLC (LON:PAM)
Economic data: US weekly jobless claims; US personal income, consumption; Chicago PMI
Ex-dividends: To knock 1.3 points off FTSE 100 index (International Consolidated Airlines Group PLC (LON:IAG), Johnson Matthey PLC (LON:JMAT), Land Securities PLC (LON:LAND, Severn Trent PLC (LON:SVT)