Greene King today announced plans to diversify into food, with 200 Hungry Horse and Old English Inns planned for the next five years as profits rose to £123 million vs. forecast £126m.
The pub owner said that food sales had generated a record £589.2m and accounted for 37 pct of business.
The planned increase in restaurants is to go alongside a managed branded, food-led expansion in the current base of 888 to 1,100 managed 'retail' outlets.
Tenanted pubs meanwhile will be scaled back from 1,584 to 1,200 higher quality, customer focused arenas, whilst key beer brands Greene King IPA, Old Speckled Hen and Scotland's Belhaven Best will be invested in, underpinning both the retail and tenanted pubs business.
Pretax profits were 'in line' with market forecasts and Chief Executive Rooney Anand added that the group's performance in the months since then had been encouraging and 'ahead of expectation'.
Hugh-Guy Lorriman, leisure analyst at Seymour Pierce commented:
Profit Before Tax (pre-exceptionals) came in at £123m (+4% vs. prior year) and current trading seems also to be strong. The company reports that retail LFL sales are +6.0% earnings per pub in the tenanted division roughly flat. This looks encouraging for shareholders.
Net debt came in at £1,348m representing, the lowest level of the larger pubcos following the £207m rights issue of last year.
We reiterate our Buy recommendation. GNK is now looking like a value play and yet it has some of the best returns in the industry and the strongest balance sheet of the larger players.