The hot summer weather and World Cup helped to boost first-half drinks sales at Greene King PLC (LON:GNK), although struggles in the food side of the business held back profits.
The FTSE 250 group, like many of its peers, benefitted from the football and the heatwave in June and July as punters poured in for a beer or three.
READ: Greene King boss to step down in April
That boosted sales in Greene King’s Pub Company division – which accounts for more than 80% of group revenues – by 2.7% in the six months ended October 14, well ahead of the market which grew 1.1%.
It didn’t help food sales though, with punters instead opting for a more liquid diet over the summer months.
On top of that, restaurant numbers in the UK have been surging in recent years, which has left eateries struggling to fill tables.
To try to get customers through the doors, pubs and restaurants have been trimming menu prices and bringing in more deals, hitting margins in the process.
As a result, adjusted pre-tax profits were broadly unchanged at £128.2mln, despite half-year revenue rising by 1.9% to £1.05bn.
Second half started well
Looking ahead to Christmas, a key time of year for pubs groups, Greene King said bookings were “well ahead” of last year, while like-for-like sales are up 2.9% after week 30.
It will need to sustain that growth in order to offset rising costs, which the company expects will be between £10-20mln more than last year.
Long-serving chief executive Rooney Anand, who recently revealed he will be stepping down in April, praised the overall performance, but warned that the UK’s exit from the European Union could “impact on consumer confidence”.
No news on CEO succession
“Like-for-like sales growth of 2.7% in the 24 weeks to October 14 has accelerated to 3.5% over the last 5 weeks - aided by weaker comparatives but also a testament to significant self-help,” said Liberum analyst Anna Barnfather.
“Cost inflation remains fierce but progress is being made to limit the net impact to £10-20mln, which should, in turn, be largely offset by interest cost savings.
“We believe that the company’s strong cash generation can continue to cover scheduled debt repayments, core capex and dividends with capital recycled from tail disposals to fund new builds.
She added: “No news on CEO succession but the outlook is optimistic and we do not expect to make changes to our FY19E forecasts.”
Speaking of forecasts, Barnfather expects Greene King to post a slight rise in sales of £481mln for the current year, although she reckons pre-tax profit will slip to £242mln
Shares were up 5.8% to 536.8p on Thursday morning, although that is still almost 100p shy of June’s highs.
--Updates for share price and analyst comment--