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Hi Fools,
Greene King PLC have issued their interim results. here is the official announcement issued via RNS.
6 December 2000
GREENE KING PLC
INTERIM RESULTS FOR
24 WEEKS ENDED 14 OCTOBER 2000
* Turnover + 14% to £202.7m
* Trading profit before goodwill and exceptional items + 23% to £40.6m
* Profit before tax, goodwill and exceptional items + 24% to £28.7m
* EBITDA + 19% to £49.1m
* Adjusted earnings per share + 13% to 29.6p
* Interim dividend per share +10% to 7.15p
* Good progress made by all three strands of the core business
* Trading margins increased from 18.6 to 20.0%
* Own brand volumes + 34% and total beer volumes + 15%
Chairman, David McCall comments:
'I am pleased to announce a strong set of results for the 24 weeks.
Our strategy of focusing resources on those segments of the market in which we
can develop strong and profitable positions has continued to pay off. Looking
forward, we believe that much value remains to be extracted from the
traditional pub and beer markets by improving their management and quality.
We are concentrating on achieving leadership with our ale brands and
traditional quality pubs in southern Britain. This strategy is being pursued
aggressively by a judicious mix of organic growth, marketing investment,
improved management, asset rationalisation and acquisition.'
For further information:
Greene King plc 01284 763222
Tim Bridge, Chief Executive
Michael Shallow, Finance Director
Financial Dynamics 020 7831 3113
Tom Baldock
Chairman's Statement
Results
I am pleased to announce a strong set of results for the 24 weeks ended 14
October 2000 achieved in the most testing conditions witnessed in our markets
for some time. Our profit before tax, goodwill and exceptional items grew 24
per cent to £28.7 million, benefiting from a 14 per cent rise in turnover to
£202.7 million. Trading profit margins rose robustly from 18.6 to 20.0 per
cent as we completed the rationalisation of the Marston's pubs and Morland
business acquired during the previous year. This margin improvement enabled
our trading profit before goodwill and exceptionals to increase by 23 per cent
to £40.6 million.
The good progress made by all areas of the core business, combined with the
improving performance of the acquired businesses, increased our adjusted
earnings per share by 13 per cent to 29.6 pence per ordinary share. The board
is recommending a 10 per cent increase in the interim dividend to 7.15 pence
per share which will be paid on 29 January 2001 to those shareholders on the
register at the close of business on 22 December 2000.
Finance
Our key measure of operational cashflow is EBITDA. This represents our
earnings before interest, tax, depreciation, amortisation and exceptional
items, which increased by 19 per cent to £49.1 million in the period. This
helped drive down our net debt, which fell sharply to £326.8 million, compared
with £390.6 million a year ago.
We continued our strategy of investing only where there are clear
opportunities for achieving returns well ahead of our cost of capital and in
the period our investment amounted to £12.8 million. We have also continued
our policy of disposing of assets that are either no longer core to our
strategy or which will not produce an adequate return over the longer term.
The buoyant property market in the south of England has led to us benefiting
from asset sale proceeds amounting to £17.3 million without damaging our
underlying profitability. Our balance sheet has strengthened considerably,
gearing having reduced from 95 per cent last year to 74 per cent this year,
and we believe that we have the financial resources to take advantage of
attractive investment opportunities which might arise in the future.
Strategy
It is our strategy to build sustainable shareholder value by focusing the
resources of the company on those segments of our market in which we can
develop strong and profitable positions. This we do by differentiating our
customer offering by means of branding, service and quality. We seek to
exploit the quality and traditional nature of our operations, and to refrain
from competing in those sectors of the market which are fashion-led, volatile
and investment-hungry.
We believe that much value remains to be extracted from the traditional pub
and beer markets by improving their management and quality. To this end, we
are concentrating on achieving leadership with our ale brands and quality
traditional pubs in southern Britain. This strategy is being pursued
aggressively by a judicious mix of organic growth, marketing investment,
improved management, asset rationalisation and acquisition.
Pub Company
Our managed pubs business enjoyed a good 24 weeks, increasing its turnover by
6 per cent to £119.2 million and its adjusted trading profit by 9 per cent to
£21.7 million. The business experienced a year of extensive rationalisation,
seeing the number of managed pubs fall from 622 in October 1999 to 504 at the
same point this year, as we pursued our strategy of improving our average
estate quality. Allowing for the smaller size of the estate, turnover per pub
rose by 17 per cent and adjusted trading profit by 21 per cent.
Trading margins increased from 17.7 to 18.2 per cent, driven by the synergies
generated by the Morland acquisition and the transfer to tenancy or disposal
of marginal managed houses. The underlying margin performance was even
stronger, with both liquor and food gross margins at record levels for the
business while still sustaining competitive price points.
We have been particularly pleased by the strong performance of our traditional
high street pubs - 'town locals' as we call them - which are located in highly
competitive town and city centre sites. This division has previously felt the
full force of the advent of large numbers of new branded 'super-pubs' onto the
high street, but has fought back strongly this year by strengthening its
management, refocusing on its outlets' individuality and improving the quality
of its offer, particularly its food business. This emphasis on differentiated
quality led to a strongly positive like-for-like sales performance at a time
when some of our competitors have been experiencing difficulties, while a
highly selective investment programme has boosted returns significantly.
Our two other major managed pub divisions - Hungry Horse and Community Pubs -
continued to perform well, with both enjoying like-for-like sales growth.
While Hungry Horse is branded and has a very strong value food offer, both
divisions are focused on a community pub ethos combining local activities and
a strong regular clientele. In both businesses we are continually reviewing
and refining our offer to keep ahead of the competition, combining prudent
capital investment with first class management. The 24 weeks saw a pause in
the continued geographical expansion of the Hungry Horse brand as the division
focused on fully incorporating those outlets acquired from Morland, but we are
now restarting the site acquisition programme as we pursue our objective of
spreading the brand further afield.
The higher specification food-led pub market, meeting rising demand for high
quality catering in the informal environment of a traditional pub, is one
which we are targeting. These businesses sit within our Inns division and are
divided into two principal trading formats: King's Fayre (family friendly pub-
restaurants) and traditional inns (a premium food offer). We are now
trialling two new concepts aimed at taking both formats to the next stage in
their evolution and have been encouraged by the response to date. This
division also performed well, achieving positive like-for-like sales in a
highly competitive market by offering a combination of quality and value.
Pub Partners
The performance of our tenanted and leased pub estate was particularly
encouraging as its strategy continued to produce trading success. Including
an extra 2 weeks' trade from the Marston's outlets and a further 14 week
contribution from those sites acquired with Morland, the division registered a
37 per cent increase in turnover to £41.9 million and a 43 per cent increase
in adjusted trading profit to £16.3 million, compared with the same period
last year. Trading margins increased from 37.3 to 38.9 per cent as
acquisition synergies boosted business efficiencies.
Pub Partners' strategy aims to differentiate its businesses in the minds of
the consumer and potential tenants by operating the best estate of individual
high quality pubs in southern Britain. This entails the recruitment of the
best tenants for our outlets, selective investment, high quality operational
management and well-sited sustainable outlets. To this end we have been
improving the average asset quality of the estate by transferring many smaller
managed houses, which make excellent tenanted businesses, to tenancy, and by
selling less viable outlets.
We continued to make progress in improving average turnover and trading profit
per pub during this period, with the weighted average turnover and adjusted
trading profit per pub increasing by 7 and 12 per cent respectively. This
plan to continue improving the estate's quality enables us to compete
successfully against many of the larger branded bar chains by utilising the
talents of entrepreneurial licensees to operate highly individual, and often
premium priced, outlets for more discerning customers. We believe that this
approach offers our current estate significant further potential.
Brewing and Brands
Our Brewing and Brands division comprises our beer brand brewing and
wholesaling business, and is founded on the growing consumer franchises of our
key traditional beer brands - Greene King IPA, Abbot Ale, Old Speckled Hen and
Ruddles - and on our strong emphasis on providing friendly and effective
customer service. Our strategy is to market and sell our brands aggressively,
while not undermining margins, in order to become the traditional ale market
champion. Much progress was made in the 24 weeks, with our own brand volumes
increasing by 34 per cent and total beer volumes by 15 per cent on the
previous year, against a beer market which declined by 1 per cent in the same
period.
This strong branded progress, combined with the additional trading
contribution from Morland, enabled Brewing and Brands to raise its turnover by
22 per cent to £41.6 million and its adjusted trading profit by 40 per cent to
£5.6 million. The division's trading margins strengthened from 11.8 to 13.5
per cent as we continued to reap the benefits of transferring the Abingdon
brewing operations to Bury St Edmunds, where our brewery is now running
consistently at over 90 per cent capacity utilisation on two shifts. We also
completed the rationalisation of our distribution network, closing three
smaller depots in the Home Counties and transferring their operations to a
new, purpose built distribution centre in Crayford which will allow us to
improve our service levels to customers in the south-east yet further.
The Board
The managing director of Brewing and Brands, Brian Field, left us in August
following the final completion of the transfer of Morland's brewing operations
to Bury St Edmunds. Brian had been with us since 1986 and I would like to
thank him for his service to the company during those fourteen years.
People
The company is now emerging from a period of several years of dramatic change
in all areas of its operations during which time it has made unprecedented
demands of all its employees in order to meet the challenges posed by new
market conditions. This has entailed our employees adapting to new
strategies, structures, systems and ways of working, with many having to learn
new skills. That they have done so with such success is evident both in our
financial performance and strategic progress, and I would like to thank them
all for their immense contribution.
Current trading
Current trading conditions remain highly unpredictable and competitive, but
the business continues to move forward by following its proven strategy.
Like-for-like sales in our pubs remain positive and we are most encouraged by
the continued growth of our key beer brands.
Our strategy of prudent investment in traditional pubs and ale brands, which
are differentiated by their intrinsic quality and individuality and our
emphasis on good management, is proving capable of delivering sustainable
shareholder value over the longer term. We are pleased with the progress
being made by the businesses acquired last year and look forward to the future
with confidence.
David McCall
Chairman
5 December 2000
GROUP PROFIT AND LOSS ACCOUNT
for the twenty-four weeks ended 14 October 2000
24 weeks 24 weeks 52 weeks
to to to
14.10.00 16.10.99 29.04.00
Before Goodwill
goodwill and as
and restated
Change exception exceptio Total Total Total
als nals
Note % £m £m £m £m £m
Turnover +14 202.7 - 202.7 177.5 414.1
Trading profit
Before
goodwill and 2 +23 40.6 - 40.6 33.1 80.1
exceptionals
Amortisation of
goodwill - (2.0) (2.0) (1.0) (3.5)
Exceptional 3 - (1.6) (1.6) (6.9) (15.0)
costs
Total 40.6 (3.6) 37.0 25.2 61.6
Disposal of
fixed assets - 1.7 1.7 0.1 3.1
Profit before
interest 40.6 (1.9) 38.7 25.3 64.7
Interest (11.9) - (11.9) (10.0) (25.6)
Profit before
taxation 28.7 (1.9) 26.8 15.3 39.1
Taxation 4 (6.7) 0.4 (6.3) (4.2) (6.1)
Profit after 22.0 (1.5) 20.5 11.1 33.0
taxation
Dividends (5.3) - (5.3) (4.8) (16.7)
Retained profit 16.7 (1.5) 15.2 6.3 16.3
Profit before
taxation, goodwill +24 28.7 23.1 54.5
and exceptionals
Earnings per
share
- adjusted 5 +13 29.6p 26.3p 59.2p
- basic 5 27.6p 16.7p 46.7p
- diluted 5 27.6p 16.7p 46.7p
Dividend per +10 7.15p 6.50p 22.5p
share
Adjusted
trading 20.0% 18.6% 19.3%
profit/turnover
Adjusted
taxation/profit 23% 24% 23%
Adjusted interest 3.4 3.3 3.1
cover (times)
Adjusted earnings per share, trading profit, taxation, interest cover and
dividend cover exclude the effect of exceptional items and the
amortisation of goodwill.
There were no other recognised gains and losses in the period.
BALANCE SHEET
as at 14 October 2000
As at As at As at
14.10.00 16.10.99 29.04.00
as
restated
Note £m £m £m
Fixed assets
Intangible assets 83.0 90.5 85.0
Tangible assets 694.3 724.9 701.8
Investments 25.7 30.3 27.8
803.0 845.7 814.6
Current assets
Stocks 11.1 13.1 11.2
Debtors 34.4 34.1 37.4
Cash at bank 0.6 0.5 1.2
Creditors: due within one
year
Short term debt (1.8) - -
Other creditors (82.7) (90.4) (82.7)
Net current liabilities (38.4) (42.7) (32.9)
Total assets less current 764.6 803.0 781.7
liabilities
Creditors: due after more
than one year
Medium and long term debt (325.6) (391.1) (358.5)
Net assets 439.0 411.9 423.2
Capital and reserves
Called-up share capital 6 18.6 18.5 18.6
Share premium account 6 180.2 178.4 179.6
Revaluation reserve 6 104.4 108.5 104.6
Profit and loss account 6 135.8 106.5 120.4
Shareholders' funds 439.0 411.9 423.2
Net debt 326.8 390.6 357.3
Gearing 74% 95% 84%
Net assets per share 592p 619p 571p
CASH FLOW STATEMENT
for the twenty-four weeks ended 14 October 2000
24 weeks 24 weeks 52 weeks
to to to
Change 14.10.00 16.10.99 29.04.00
as
restated
Note % £m £m £m
Trading cashflow (EBITDA) 7 +19 49.1 41.2 98.9
Working capital movements 8 (1.7) 7.2 3.6
Exceptional items (2.4) (6.9) (10.1)
Cash inflow from operations 45.0 41.5 92.4
Cash inflow from operations 45.0 41.5 92.4
Returns on investments and
servicing of finance
Interest paid (12.5) (10.9) (27.2)
Interest received 0.2 0.1 1.3
(12.3) (10.8) (25.9)
Taxation 2.5 (0.5) (11.2)
Capital expenditure
Purchase of tangible fixed assets (12.8) (13.5) (38.0)
Sales of tangible fixed assets 17.3 23.8 59.3
Movements in trade loans 2.1 2.6 5.1
6.6 12.9 26.4
Acquisitions - (166.9) (167.7)
Equity dividends paid (11.9) (8.8) (13.6)
Cash inflow/(outflow) before 29.9 (132.6) (99.6)
financing
Financing
Issue of shares 0.6 0.7 1.0
Advance of bank loans - 354.4 321.8
Repayment of bank loans (32.9) (222.0) (222.0)
(32.3) 133.1 100.8
(Decrease)/increase in cash (2.40) 0.5 1.2
Reconciliation to movement
in net debt
(Decrease)/Increase in cash (2.4) 0.5 1.2
Cash outflow from decrease 32.9 (132.4) (99.8)
in debt
Decrease in debt resulting 30.5 (131.9) (98.6)
from cashflows
Morland - debt acquired - (85.5) (85.5)
Decrease/(increase) in debt 30.5 (217.4) (184.1)
Opening net debt (357.3) (173.2) (173.2)
Closing net debt -16 (326.8) (390.6) (357.3)
NOTES TO THE ACCOUNTS
for the twenty-four weeks ended 14 October 2000
1. Basis of Preparation
The interim accounts cover the 24 weeks to 14 October 2000. They have been
prepared under the accounting policies set out in the company's statutory
accounts for the 52 weeks to 29 April 2000 and are unaudited. The taxation
charge is calculated by applying the forecast annual tax rate to the profit
for the period adjusting for the tax effect of exceptional items. Brand
marketing and property repairs are accrued in proportion to the forecast
expenditure for the year.
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The figures for the 52 weeks ended 29 April 2000 have been derived from
the statutory accounts which have been filed with the registrar of companies
and on which the auditors gave an unqualified report.
The results for the 24 weeks ending 16 October 1999 have been restated to
reflect the adoption of FRS15. This has had the effect of reducing the
trading profit last year by £1.3 million. The impact of this restatement in
each of the business segments is set out in note 2.
2. Business Segment Analysis
Assets Trading Trading
employed Turnover EBITDA profit profit
change
2000/01 (24 weeks) £m £m £m £m %
- Total
Pub Company 375.0 119.2 27.1 21.7 +9
Pub Partners 255.2 41.9 17.4 16.3 +43
Brewing and Brands 62.5 41.6 7.3 5.6 +40
Corporate 73.1 - (2.7) (3.0)
765.8 202.7 49.1 40.6 +23
Goodwill and - - - (3.6)
exceptionals
Net debt (326.8) - - -
439.0 202.7 49.1 37.0
An actuarial revaluation of the Greene King Pension Scheme was
undertaken as at 5 April 2000, requiring additional contributions.
In the period a further £0.7 million has been provided for under
corporate.
1999/00 (24 weeks) - Total (as restated)
Pub Company 437.5 112.9 25.5 20.0
Pub Partners 224.2 30.6 12.2 11.4
Brewing and Brands 71.4 34.0 5.6 4.0
Corporate 69.4 - (2.1) (2.3)
802.5 177.5 41.2 33.1
Goodwill and - - - (7.9)
exceptionals
Net debt (390.6) - - -
411.9 177.5 41.2 25.2
2. Business Segment Analysis (Continued)
Assets Trading
Employed Turnover EBITDA profit
1999/00 (52 weeks) £m £m £m £m
- Total
Pub Company 379.9 258.4 57.7 45.0
Pub Partners 253.5 74.1 30.6 28.7
Brewing and Brands 65.2 81.6 13.3 10.6
Corporate 81.9 - (2.7) (4.2)
780.5 414.1 98.9 80.1
Goodwill and - - - (18.5)
exceptionals
Net debt (257.3) - - -
423.2 414.1 98.9 61.6
The 1999/00 trading profits of individual business segments have been
restated to reflect FRS15 accounting changes and to re-allocate
directly attributable costs previously shown under corporate as
follows:
As Impact Costs
previously of re- As restated
reported FRS15 allocated
£m £m £m £m
Pub Company 21.6 (0.7) (0.9) 20.0
Pub Partners 12.6 (0.6) (0.6) 11.4
Brewing and Brands 4.8 - (0.8) 4.0
Corporate (4.6) - 2.3 (2.3)
Trading profit 34.4 (1.3) - 33.1
3. Exceptional Costs
Exceptional costs of £1.6 million were incurred completing the integration of
businesses acquired last year and rationalising the depot infrastructure
(1999: £6.9 million).
4. Taxation
24 weeks 24 weeks 52 weeks
to to to
14.10.00 16.10.99 29.04.00
£m £m £m
Current taxation
Corporation tax 6.7 6.6 12.7
Recoverable on exceptional (0.4) (1.4) (2.5)
costs
6.3 5.2 10.2
Credit in respect - (1.0) (4.1)
of prior years
6.3 4.2 6.1
5. Earnings per share
Basic earnings per share has been calculated by dividing the profit after
taxation by the weighted average number of shares in issue of 74.2 million
(1999: 66.5 million). Adjusted earnings per share excludes the effect of
goodwill amortisation, exceptional items and are presented to show more
accurately the underlying performance of the group.
Adjusted earnings Earnings Earnings per share
per share 24 weeks 24 weeks 24 weeks 24 weeks
to to to to
14.10.00 16.10.99 14.10.00 16.10.99
As As
restated restated
£m £m p p
Basic 20.5 11.1 27.6 16.7
Goodwill and exceptional 1.5 6.4 2.0 9.6
Adjusted 22.0 17.5 29.6 26.3
Diluted earnings per share has taken account of 0.1 million (1999:
0.1 million) additional contingent shares.
6. Movements in Shareholders' Funds
Share Share Revaluat Profit Total
capital premium ion and loss
reserve account
£m £m £m £m £m
At 29 April 2000 18.6 179.6 104.6 120.4 423.2
Share capital - 0.6 - - 0.6
issued
Retained profit - - - 15.2 15.2
Transfers - - (0.2) 0.2 -
At 14 October 2000 18.6 180.2 104.4 135.8 439.0
7. Trading Cashflow (EBITDA)
24 weeks 24 weeks 52 weeks
to to to
14.10.0 16.10.99 29.04.00
As
restated
£m £m £m
Trading profit before goodwill and 40.6 33.1 80.1
exceptionals
Depreciation 8.5 8.1 18.8
49.1 41.2 98.9
Trading cashflow (EBITDA) represents earnings before interest,
tax, depreciation, amortisation and exceptionals.
8. Working Capital Movements
24 weeks 24 weeks 52 weeks
to to to
14.10.00 16.10.99 29.04.00
As
restated
£m £m £m
Decrease in stocks 0.1 0.2 1.8
Decrease/(increase 1.1 (1.3) (4.5)
) in debtors
(Decrease)/increase in (2.9) 8.3 6.3
creditors
(1.7) 7.2 3.6
9. Interim Report
The interim report will be posted to shareholders on 13 December 2000. Copies
will be available after that date from the Company Secretary, Greene King plc,
Westgate Brewery, Bury St Edmunds, Suffolk IP33 1QT.
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