Greene King delivers solid interims but remains cautious

Pub operator Greene King has delivered solid interim results driven by a good performance from its retail division, although warned that trading conditions are likely to remain challenging for the rest of the year.

For the 24 weeks ended October 14th, revenues grew 7.3% to £566.2m (H1 2012: £527.5m) driven by 10.9% growth in retail, which now generates 72% of group sales.

Pre-tax profits were up 48.7% to £84.3m (H1 2012: £56.7m), with operating profit before exceptionals increasing 6.1% at £122.7m (H1 2012: £115.6m). Stripping out exceptionals, pre-tax profits were up 7.1% at £82.7m (H1: 2012: £77.2m).

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The FTSE-250 firm is in the third year of its strategic plan to grow the size and quality of its retail estate and reduce the size and improve the quality of its tenanted and leased estate. This has led to an improved return on capital employed (ROCE); on a rolling 12-months basis, ROCE has risen 20 basis points (bps) to 8.7%, well ahead of its cost of capital.

As a result of the strong performance it has declared an interim dividend of 7.15p per share, up 6.7% on last year.

Net debt at the period-end was £1,462.9m, a reduction of £30.3m from the previous year-end, with the key movements being positive free cash flow of £36.9m, disposal proceeds of £13.6m and investment in growing its retail estate of £21m.

Rooney Anand, Greene King Chief Executive Officer, said: "Trading conditions are likely to remain challenging for the rest of this financial year as our customers maintain a prudent approach to spending.

"However, our strategy is tailored to the conditions, as it provides 'everyday treats' for our customers, and we remain confident that we can continue to deliver sustainable earnings and dividend growth for our shareholders."

CM