September 3, 2008

Belhaven Helps Greene King to Weather Current Financial Storms

By Martin Flanagan

ROBUST trading in Scotland bolstered the latest update from Greene King yesterday, despite the company saying wider consumer confidence and spending were flagging.

The stronger-than-expected performance, however, still sent shares in one of Britain's biggest regional pubs/brewing groups up nearly 10 per cent.

Greene King, with more than 320 pubs north of the Border through its ownership of Belhaven, said the Scottish subsidiary's managed estate had driven up like-for-like sales 4.6 per cent in the 16 weeks to 24 August.

Shares in the Suffolk-based company closed up 48.5p at 581p yesterday, as it said that, "despite current trading challenges and lacklustre outlook for the UK economy", it anticipated meeting its full-year trading expectations.

City analysts cheered a much-reduced 1.6 per cent fall in like- for-like sales in Greene King's overall managed pub business.

That compared with a 2.8 per cent drop in the eight weeks to mid- May. Sales at GK's tenanted pubs were down 1.7 per cent in the latest period.

The group said in a statement: "Market conditions remain challenging as consumer confidence continues to weaken and consumer expenditure continues to contract."

It added that its "larger, food-led sites" continued to perform strongest, singling out its Hungry Horse value-for-money brand.

Smaller, drinks-led pubs "are being more adversely affected by market conditions", GK added.

The brewing operation, whose main brands include Greene King IPA, Abbot Ale and Ruddles County, saw volumes fall 3 per cent in the period.

But the company said this was a strong performance "given near double-digit declines in the on-trade beer market".

Without giving details, it said it had continued to gain share in both the on (pub) and off (take-home) trade, and in both the standard and premium ale categories.

GK, with about 2,500 pubs in all, said that it was "going forward into the worsening consumer environment in a strong financial position".

The group said its cashflow and balance sheet were strong, and that, following the recent successful debt refinancing, interest rates were 100 per cent fixed. No further refinancing was required until 2012.

GK recently reported pre-tax profits up 2 per cent at GBP 142m for the 53 weeks to 3 May.

Broker Landsbanki, which recently downgraded the company's shares to a "reduce" from a "hold" recommendation due to concerns that declining household spending would persist through 2009, said in a note yesterday: "We do not see anything in this statement that would cause us to change our view."

The company revealed at the weekend that the Scottish operation's flagship ale, Belhaven Best, is now ranked as the fifth best- selling on-trade alcohol brand in Scotland.

It jumped from ninth position last year, according to independent research from consultancy AC Nielsen.

Originally published by Martin Flanagan City Editor.

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