Smoke ban fails to dent Greene King
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Greene King believes it is well-placed to deal with the smoking ban, due to be introduced in England next summer, after experiencing the impact of the Scottish ban on its Belhaven acquisition.
Rooney Anand, chief executive, said the impact of the ban in the two countries would not be directly comparable because of differences in the weather and the proportion of sales generated by food.
But the effects on Belhaven in the first 12 weeks since the Scottish ban started in March had not been as bad as everyone had expected and sales were down just 0.3 per cent.
The acquisition of Belhaven in October and Ridley’s of Essex last July drove Greene King’s total sales from £707.5m to £818.6m for the year ended April 30. Pre-tax profit increased from £87.6m to £120.9m.
The company – which is acquiring Hardys and Hansons for £270m cash – also said the underlying profit of its core business was up 4 per cent.
“It has been a busy year and the core business has performed well,” said Mr Anand.
At the same time, the company had been preparing for the English smoking ban, partly by creating outdoor areas for smokers in many of its pubs.
Earnings per share rose from 45p to 60.6p.
The proposed final dividend of 14.35p (12.93p) lifts the total for the year 11 per cent to 20.15p.
The shares – which were priced at £13 for a placing last August to help fund the Belhaven acquisition and have since undergone a 2-for-1 split – closed yesterday at 825½p, down 4½p.
■In the first four weeks of the Scottish smoking ban Belhaven’s sales rose 5 per cent but, in the next eight weeks, they were more than 2 per cent down. This is the first real information on the impact of a smoking ban on a fair-sized pub company. Mr Anand is probably right that the effects will be different in England but he is working hard building open-sided conservatories and car-port-type constructions at the back of Greene King’s pubs to keep smokers onside even in adverse weather. Forecasts for this year of about £140m put the shares on a prospective multiple of 13. Investors should not doubt that – once Hardys and Hansons is swallowed – further acquisitions will follow from among the remaining 40 or so family-owned brewers still operating. Greene King needs more deals to maintain its growth record.
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