Greene King PLC - Half-year Report

Group  revenue

Adjusted profit before tax1,2

Statutory profit before tax

Adjusted earnings per share1,2

Dividend per share3

Net debt: EBITDA1,2

Return on capital employed2
















Continued LFL sales momentum in Pub Company

·      Pub Company like-for-like (LFL) sales up 2.7%, ahead of the market4 up 1.1%

·      Driven by the ongoing benefits from our investment in value, service and quality (VSQ), our strategic focus on four core brands, and boosted by good weather and the World Cup

·      Pub Partners LFL net income up; Brewing & Brands revenue up 7.5%

Consistent cash generation, disciplined capital allocation & attractive property valuation

·      Operating cash generated5 covers scheduled debt repayment, core capex and dividends

·      Further steps taken to refinance Spirit debenture, reducing cost and increasing flexibility of our debt; to date annualised cash interest saving c.£13m and net present value benefit c.£45m

·      Interim dividend maintained at 8.8p per share; dividend cover5 of 1.9x

·      Estate optimisation; tail disposal proceeds fund new builds, helping to grow average weekly take in Pub Company by 7.9% over the last three years

·      Pub estate valuation supports maintained leverage; market value of £4.5bn

Current trading and outlook

·      LFL sales in Pub Company were up 2.9% at week 30; Pub Partners and Brewing & Brands performing in line with expectations

·      Christmas bookings well ahead of last year

·      Remain on track to limit full year net cost inflation to £10-20m

Rooney Anand, chief executive officer

"We have seen continued positive momentum in Pub Company, which was sustained beyond the boost of the World Cup and the summer weather. The hard work of our teams, combined with the investments we made to improve our customer experience, is driving sales outperformance to the market. We remain highly cash generative, meeting our debt repayment requirements, investing in our pubs and paying an attractive, sustainable dividend out of operating free cashflow. Good progress was made refinancing the Spirit debenture, which will reduce the cost of our debt and increase the strength and flexibility of our balance sheet.

"Looking forward, Christmas bookings are up on last year and we look forward to ensuring customers have a great time celebrating the festive season in our pubs. Ongoing uncertainty around Brexit may impact on consumer confidence, but as a team we are focused on our key strategic priorities and remain confident of our outlook for the financial year."


Greene King plc

Rooney Anand, chief executive officer

Richard Smothers, chief financial officer

Tel: 01284 763222


Alastair Hetherington / Philip Walters

Tel: 0207 251 3801

Further information is available at or on Twitter using @greeneking

There will be a presentation for analysts and investors at 9.30am at TLT, 20 Gresham Street, London EC2V 7JE.

The conference will also be accessible by phone: 0808 109 0700; UK Toll Free; +44 (0) 20 3003 2666 Standard International Access. Conference ID: Greene King



24 weeks



YOY Change

Total revenue




·      Pub Company




·      Pub Partners




·      Brewing & Brands




Group EBITDA1,2




Group operating profit before exceptional and non-underlying items1,2




·      Pub Company




·      Pub Partners




·      Brewing & Brands




Group profit before tax and exceptional and non-underlying items2




Basic EPS6




Adjusted basic EPS1,2




Dividend per share3




Core capital expenditure2




Net debt




Net cash flow from operations




Free cash flow2






The positive momentum at the start of the financial year continued through the first half with Pub Company maintaining its market outperformance, reflecting the success of initiatives to drive underlying sales growth, recording LFL sales growth of 2.7%. Our Greene King branded local pubs traded particularly well, with LFL sales of 4.9%. Pub Partners LFL net income was ahead of last year and Brewing & Brands revenue was up 7.5%, helped by the good summer weather.  

Our cost mitigation programme is on track and we still expect to offset £30-35m of the £45-50m gross cost inflation forecast for the year. Meanwhile, we made further steps towards refinancing the Spirit debenture and have now refinanced 43% of this debt platform, reducing the cost of our debt and increasing the strength and flexibility of our balance sheet.

We remain focused on upholding our long track record of strong cash flow generation before disposal proceeds, covering our scheduled debt repayments, core capex requirements and our attractive, sustainable dividend. In addition, we continue to improve our estate quality and drive higher returns by recycling capital from non-core pub disposals to fund new builds and acquisitions. Through this proven strategy we can continue to deliver long-term value for our shareholders.


Group revenue was £1,051.2m, 1.9% ahead of last year, driven by strong sales performances in Pub Company and Brewing & Brands. This sales growth, as well as the reduction in interest costs from the ongoing Spirit debenture refinancing programme, offset the underlying cost pressures and enabled group profit before tax and non-underlying and exceptional items1,2 to increase by 0.2% to £128.2m.


Pub Company delivered total sales of £850.3m, up 1.6% from 2.4% fewer pubs. Average weekly take (AWT) per pub was £20.6k, up 4.0%, reflecting the programmes in place to improve underlying sales, as well as the good weather and the successful World Cup. LFL sales were up 2.7%, driven predominantly by higher drink volumes. Pub Company operating profit was £134.2m, down 2.0%, and the operating profit margin was 15.8%, down 0.6%pts, due to cost inflation, the implementation of the VSQ investment programme in the second half of last year and the phasing of cost mitigation plans during the year.


Pub Partners revenue was down 1.3% to £90.9m due to 4.6% fewer pubs trading year-on-year. LFL net income was ahead of last year, driven by higher LFL rental income as well as increased LFL drink sales. Pub Partners operating profit margin was down 1.8%pts and LFL net profit was down 1.0%, due to higher central costs, including one-off legal costs.


Brewing & Brands revenue was up 7.5% to £110.0m following the good summer weather and the World Cup. Operating profit was up 1.4%, while the operating profit margin was down 0.9% due to mix, with an increased sales contribution coming from third party beers.


Free cash flow, which is reported before disposal proceeds, was £25.4m, up £14.8m due to reduced tax and interest payments, and our operating cash over the last twelve months more than covered our scheduled debt repayments, core capital expenditure and dividend payments.


Proceeds from the disposal of 40 pubs and 13 other properties were £30.7m, from which we funded three new builds and two single site acquisitions.


Adjusted earnings per share were up 0.3% to 33.1p and the board has recommended a half year dividend per share of 8.8p, in line with last year.


The business generated a strong ROCE of 8.5% which remains comfortably above our weighted average cost of capital. Our returns on investment for core development capex were over 30% and the net asset value per share was £6.88. As part of the Spirit debt refinancing programme, we carried out an estate revaluation which indicated a market value of £4.5bn, versus a book value of £3.6bn.


Conditions in our main markets are reducing the supply of competitors, with the pace of eating and drinking out outlet closures accelerating. The annual rate of decline increased from 1.3% in March 2018 to 2.5% in June 2018 (source: CGA & Alix Partners Market Growth Monitor). Restaurant numbers, which were up 11.0% in total for the five years from 2013-2018, declined by 1.0% in the second quarter of 2018, while pubs and bars declined by 1.3%.

The drink-led segment continued to outperform the food-led segment and this trend was intensified by good summer weather and the World Cup. The moving annual total (MAT) LFL sales growth for drink-led pubs was up 2.7%, while pub restaurants MAT LFL sales were up 0.3% and restaurants were down 0.9% (source: Coffer Peach Business Tracker October 2018). Our strong portfolio of brands and our active estate management programme enable us to react dynamically to shifting consumer behaviour. We extended the Greene King brand into more food-led pubs, which helped to improve our drinks offer in those pubs through better ranging, especially in categories such as gin and cider.

Both consumer confidence and leisure spending increased over the summer months but declined more recently, driven by negative sentiment around levels of personal debt and disposable income (Deloitte UK Leisure Consumer - Q3 2018). Subdued consumer confidence coupled with the growing uncertainty around Brexit means that providing the best VSQ for our customers is critical for improving market share. Our ongoing customer investment programme helped drive increases in Net Promoter Scores (NPS) and TripAdvisor scores across each of our four focus brands, with Farmhouse Inns recently topping the MCA Pub Brand Monitor rankings for average customer scores.

While the cost inflationary environment remains a headwind for the industry, we have a robust mitigation programme in place to help offset increased costs and protect our consumers from rising prices. We remain on track to mitigate £30-35m of costs and made further progress refinancing the Spirit debenture, thereby reducing our total cost of debt.



The strong momentum in Pub Company has been maintained since the period end with LFL sales up 2.9% after 30 weeks. Ongoing uncertainty around Brexit may impact on consumer confidence, but as a team we are focused on our key strategic priorities and remain confident of our outlook for the financial year.