Poor football and weather have more impact on pubs than Brexit… for now

29 June 2016 by
Poor football and weather have more impact on pubs than Brexit… for now

That was the conclusion of chief executive Rooney Anand (pictured) today as he unveiled a "transformational" set of financial results for the year 2015/16, as the company started to enjoy the benefits of its £774m acquisition last year of Spirit Pub Company. It reported revenues up to more than £2b for the year to 1 May 2016, with pre-tax profit up 60.6% to nearly £190m.

England's football team crashed out of Euro 2016 to minnows Iceland earlier this week, and Anand said that while early games had had a positive effect on trading at Greene King, which had 3,035 pubs at the end of last year, the Bury St Edmunds-based company had been hoping for more.

"Even the most cautious Suffolk accountants had not been bearish enough to assume that we would lose and certainly not to Iceland," he told The Caterer. "It's a shame but it isn't a huge factor in our outlook because Wales are still there and importantly when you get through to the knock-out stages of an event like this, the fixtures become really exciting regardless of one's nationality."

And it hasn't just been the England footballers who have been refusing to play ball - the weather hasn't been helping either. "You can see from our current trading for the eight weeks since the beginning of May that we enjoyed some good trade in May, slightly helped by the weather. Our pubs do very well when the occasional burst of sunshine is witnessed because we have a higher percentage of our assets with outside space than virtually anybody so the size of our business increases overnight because of the weather. And in June we have benefited from the football, although the weather hasn't helped us that much in June; it has been a bit more patchy and unusually the South has been 'enjoying' more unpleasant weather than up North and in Scotland," he said.

When it came to the UK's momentous decision to leave the European Union, Anand, who had let it be known before the referendum that he would have preferred a win for Remain, said that it was too early to say whether it has affected consumer confidence: "I would say the weather and the travails of English football have been more material to our business than what happened last Friday," he said.

However, he did caution in his chief executive's statement released with the company's financial results this morning that he expected confidence to dip in the near-term. Nonetheless, he expected Greene King to be well prepared for any turbulence.

"As you would expect, we are trying to be balanced about it," he said. "If we ignored the event that took place last Friday I think it would be crass, frankly, but since January, since people came back after Christmas there has been a degree of softening of sentiment and that has been witnessed and echoed in other consumer fields - particularly retail around March and April.

"With the spectre of an exit from Europe and all that might entail that has created some uncertainty and you have seen some markets react since Friday to bear that out. To put a balance on it though, we are a British business and while we do source some food and drink, particularly wine, from continental Europe, most of what we sell through our businesses is either locally sourced or globally sourced and we also would back ourselves in a crisis given that what happened in 2007-08 was in our opinion much more profound than this, and Greene King did very well post credit crunch - we posted record results four years in a row, so we have got some structural advantages in the form of very high quality real estate with a bias towards the South East of England, a very strong balance sheet and we have brought net debt to EBITDA down from a peak of nearly 6x to below 4x (3.9x), so our balance sheet and our financial strength gives us a lot of optionality."

And when asked if the weakening pound would put pressure on Greene King to increase prices, Anand replied that the situation was not necessarily as serious as had been presented in the media: "Exchange rate fluctuations do affect us, we are not immune from them, but we have hedging in place and contracts. There is a lot of hyperbole about the euro but as my finance director reminded me earlier today, it is at the same level that it was at three years ago but nobody talked about it because Brexit hadn't happened."

Nonetheless, he also indicated that the company would continue to invest in its people amid continued uncertainty over how hospitality firms, often reliant on labour from the EU, would fill vacancies following the UK's departure from the EU. Greene King, which employs around 44,000 people, earlier this year committed to offering 10,000 apprenticeships over the next three years and Anand said that programmes like that would continue to be important.

"What has been completely lost in all of this is that the National Living Wage has gone up and if there are concerns about jobs - and I genuinely and sincerely hope that there aren't and that businesses don't cut back on investment and people don't find that they are faced with the scenario they saw in '07 and '08 again - but if there are then actually our hand as an employer is strengthened.

"In fact, we are not just relying on apprenticeships. We want to have the best calibre and the best equipped group of colleagues in the industry that we can. We have 44,000 people working for us and you can either take the view that that is the biggest item of cost, which many people in the hospitality industry do, or you can see your staff as the way in which you deliver the customer experience and the brand promise which is how we see it."

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