27 Apr 2011 – Strong trading momentum continues to year-end; acquisition further enhances London presence
Pre-close trading update
Greene King announces a pre-close trading update for the 51 weeks to 24 April 2011.
Strong trading momentum has continued throughout the second half of our financial year through to our year-end. Good weather across the UK has undoubtedly helped trading in the last few weeks, but our continued strong growth is driven by our focus on strategically important categories such as food and the consistent delivery of our industry-leading customer value, service and quality across the business.
Our expanding Retail business is the engine for our ongoing growth and sector outperformance.
Greene King Retail like-for-like (LFL) sales growth is 4.7%, implying 8.2% growth since week 35, the last week to have been impacted by snow. Our largest, and award-winning, retail brand, Hungry Horse, now has 158 outlets and is achieving LFL sales growth of 10.1%. Food continues to grow in importance for Greene King Retail, with LFL food sales growth of 8.2% driving expected sales participation towards 40% for the year. Belhaven retail LFL sales growth is now 4.0% and the recently acquired Cloverleaf business is delivering strong LFL sales growth. We expect margins for the full year in Greene King Retail to be slightly ahead of last year.
Pub Partners remains in growth after 48 weeks, despite the challenges faced by the overall tenanted and leased sector. LFL EBITDA is now +0.8% and average EBITDA per pub is +1.9%. We continue to invest some of our growth into providing long-term support for our licensees to help improve both their customer offer and the overall trading environment in our tenanted and leased pubs.
Our brewing businesses continue to outperform their markets: Brewing Company total volume is +2.0% with own-brewed volume (OBV) at -2.5%, although since week 35, OBV has been in line with last year; our core English ale brands, Greene King IPA, the UK’s no.1 cask ale, Old Speckled Hen, the UK’s no.1 premium ale, and Abbot Ale, the UK’s no.2 premium cask ale are level with last year; and volume of our market leading Scottish ale brand, Belhaven Best, is +1.8%.
We have recently completed the integration of both Belhaven and Cloverleaf, while earlier this month, we announced the completion of negotiations with our banks which resulted in a new, five-year, £400m, revolving credit facility to support our retail expansion strategy.
Our balance sheet and cashflow remain healthy and in line with our expectations.
In line with our strategy to expand and improve the quality of our Retail estate, we are pleased to announce the completion of the acquisition of Realpubs for a total consideration of £53.1m. Realpubs currently operates 14 premium London pubs, of which all but one are freehold, and their offer is a well developed and highly successful one, targeting the premium, pub dining customer within London. The acquisition is being funded by our existing bank facility.
These are large, highly profitable and well invested sites with forecasted average weekly turnover of £24.5k in 2011 and forecasted average EBITDA per site of £450k. The implied forward EBITDA acquisition multiple is 8.4x. Food is currently 33% of sales and growing strongly, with around half of all sales being driven by customers coming to eat in the pubs.
Malcolm Heap and Nick Pring, the two founders of Realpubs, have been retained for a minimum of two years. They will become part of the Retail management team helping to spearhead our growth and offer development in London, including the conversion of a significant number of existing Greene King pubs to the Realpubs premium urban local concept, and within the premium segment on a national basis.
Rooney Anand, Greene King chief executive comments:
“Driven by our clear and consistent strategy of delivering excellent customer value, service and quality, trading at Greene King has been strong and as a result, we remain confident for the outcome for the year. We continue to supplement strong underlying organic growth with targeted, value-creating acquisitions to accelerate our strategic aim of growing our Retail business to around 1,100 pubs and building the best Retail estate in the UK.
We are excited by today’s acquisition as it fits well with our strategy, by further strengthening our London presence and accelerating the development of our premium pub offer. The addition of Realpubs takes the total number of Greene King sites within the M25 to 217 and positions us strongly ahead of, during and after the Olympics in London in 2012, when London and its pubs and restaurants will be visited by tourists from across the world.”
For further information:
Greene King plc
Rooney Anand, Chief Executive Tel: 01284 763222
Ian Bull, Group Finance Director
Ben Foster Tel: 020 7831 3113