Greene King’s profits battered by ‘unprecedented’ cost rises
The pub group said trading had improved recently due to the World Cup.
Greene King has posted a slump in profits amid “unprecedented” cost rises for the pub business.
Group revenues for the year to April 29 were down 1.8% to £2.2 billion, while adjusted profit before tax dropped by 11.2% to £243 million.
Pub sales were down 1.2% on a like-for-like basis, excluding the impact of snowstorms earlier in the year.
Greene King’s chief executive Rooney Anand said the business faced “unprecedented” cost increases, alongside weak consumer confidence and tougher competition.
Shares were down almost 10% in morning trade as investors digested the news.
In the year ahead, Greene King is expecting costs to rise by between £45 million and £50 million.
Pub operators face demanding and cost-conscious customers who require convenience and speed of service Paul Hickman, analyst
To offset some of this, the group is targeting savings of between £30 million and £35 million.
Trading has improved more recently due to the World Cup and good weather, with like-for-like sales rising by 2.2% over the last eight weeks.
Mr Anand said: “While it is still early days, this positive momentum has continued into the new financial year, aided by good weather and popular sporting events.
“We remain focused on continuing to drive top line growth, developing a more efficient organisation and further strengthening our capital structure to deliver long-term value creation for our shareholders.”
Pubs and other restaurant groups have been hit by cost rises from the national living wage, business rates and inflationary cost increases on food imports.
Paul Hickman, analyst at Edison Investment Research, said Greene King had been “somewhat battered” by the inflationary pressures and weaker consumer demand.
“Unfortunately, last year’s adverse trading conditions are giving way to more of the same in the current trading year,” he said.
“Pub operators face demanding and cost-conscious customers who require convenience and speed of service, and are increasingly aware of health and ask for fresh produce.
“The good news is that current period sales in the managed pub company operation were ahead 2.2% for the last eight weeks, when admittedly the weather has been pretty helpful.”