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Annual profits slumped by 11.4% at brewer and pub company Greene King (GNK) last year as it suffered from the cold British winter and rising costs.
Total group revenues were down 1.8% to £2.2bn during the 12 months to 29 April 2018 – a fall Greene King put down to “challenging market conditions and poor weather”.
Group profit before tax, exceptional and non-underlying items was down 11.2% during the period to £243m reflecting cost inflation seen in the year and investment in its pub business.
The group’s brewing arm achieved strong revenue growth, with sales up 7.4% to £215.1m driven by increased sales from free trade and exports.
Own-brewed volumes were down 1.2% with strong growth in free trade and exports offset by declines elsewhere in the on-trade. Greene King outperformed the total ale market which was down 3.7%, thereby increasing its share of the total ale market by 0.2%pts.
However, operating profits were down 1% in the division and operating profit margin was down 1.2%pts, driven by the increased cost of goods sold and changes in sales channel and customer mix, including disposals made over the year across the estate.
Its core pub division saw revenue drop 2.7% to £1.77bn due to the tough trading conditions and the 4.4% decrease in the average number of pubs trading. Pub Company EBITDA was down 10% to £362.9m due to increased cost pressures and investments.
Its Pub Partners revenue was £193.9m, down 2.5% on last year, driven by the 4.7% decrease in average pubs trading.
It said the current trading environment is still characterised by subdued consumer confidence, intense competition and rising costs.
However, pub company like for like sales are up 2.2% over the last eight weeks, aided by good weather and strong World Cup trading.
CEO Rooney Anand commented: “We made good progress improving the performance of the business during the second half of the year, despite a challenging trading environment. Our investment to improve the customer experience in our pubs and the focus on our strategic priorities are beginning to pay off. Positive momentum, both in terms of trading and customer satisfaction, is returning to our business.
“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.
“We expect the trading environment to remain challenging for some time, but we strongly believe people will continue to choose the great British pub as the place to enjoy time with friends and family.”
While Greene King said trading during the year “was below our initial expectations”, it pledged to pay a final dividend of 24.4p to take the total dividend for the year to 33.2p, in line with last year.
Morning update
Yesterday afternoon Conagra Brands (CAG) announced it had agreed a US$10.9bn deal to buy frozen food specialist Pinnacle Foods (PF).
Conagra said the combination of “two growing portfolios of iconic brands will serve as a catalyst to accelerate value creation for shareholders”.
With annual net sales in excess of $3 billion, Pinnacle Foods’ portfolio of frozen, refrigerated and shelf-stable products includes brands as Birds Eye, Duncan Hines, Earth Balance, EVOL, Erin’s, Gardein, Glutino, Hawaiian Kettle Style Potato Chips, Hungry-Man, Log Cabin, Tim’s Cascade Snacks, Udi’s, Vlasic and Wish-Bone, among others.
Based on both companies’ latest fiscal year results, pro forma net sales would have been approximately $11bn.
Sean Connolly, president and chief executive officer of Conagra Brands commented: “The acquisition of Pinnacle Foods is an exciting next step for Conagra Brands. After three years of transformative work to create a pure-play, branded food company, we are well-positioned to accelerate the next wave of change.”
“The addition of Pinnacle Foods’ leading brands in the attractive frozen foods and snacks categories will create a tremendous opportunity for us to further leverage our proven innovation approach, brand-building capabilities, and deep customer relationships. With greater scale across leading, iconic brands, an unwavering focus on driving profitable growth, and a strong balance sheet and cash flow, we are creating a tremendous platform to drive meaningful shareholder value.”
Pinnacle Foods chief executive officer Mark Clouse added: “Because of our employees’ incredible work, Pinnacle’s total shareholder return is approximately 275 percent since our IPO, and today marks an important milestone in the company’s journey. The portfolios and capabilities of both enterprises are impressive and complementary.”
On the markets this morning, the FTSE 100 has edged down 0.1% to 7,614.5pts.
Greene King has slumped 5.2% to 605.5p after this morning’s update.
Early risers include Nichols (NICL), up 2.8% to 1,547.8p, Hilton Food Group (HFG), up 1.2% to 984p and Sainsbury’s (SBRY), up 1% to 319.3p.
Fallers include Coca-Cola HBC (CCH), down 1.2% to 2,504p and B&M European Value Retail (BME), down 1% to 406.5p.
Yesterday in the City
The FTSE 100 surged 1.1%, or more than 80pts, higher yesterday to close trading at 7,621.7pts after hopes that the rhetoric around a trade war between the US and the EU is softening.
Sainsbury’s (SBRY) rebounded after being one of the FTSE’s biggest fallers on Tuesday, rising 3.3% to 316.2p yesterday.
Ocado (ODCO) continued to trade well beyond 1,000p, rising a further 3.9% yesterday to 1,061p.
A decline in the first quarter like for like sales of Costa Coffee did not deter investors as its owner Whitbread (WTB) finished the day up 3.4% to 4,027p after its first quarter trading statement.
The day’s other risers included Compass Group (CPG), up 1.9% to 1,610.5p, Tate & Lyle (TATE), up 1.5% to 640.4p, Britvic (BVIC), up 1.3% to 777p and Premier Foods (PFD), which regained 2.3% to 37.6p after recent losses.
Butchery group Crawshaw (CRAW) slumped 21.4% to 5.5p yesterday after releasing a trading statement showing a double-digit slump in like-for-like high street sales.
Just Eat (JE) dropped 7.1% yesterday afternoon to 755.2p after it told analysts and investors at a capital markets day that its profits could be subdued due to the cost of investments.
Other fallers included PureCircle (PURE), down 2.3% to 390p, McColl’s (MCLS), down 1.4% to 215p, Associated British Food (ABF), down 0.9% to 2,811p, Greggs (GRG), down 0.8% to 1,000p and Greencore (GNC), down 0.8% to 183.2p.
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