June 28, 2018 / 6:30 AM / a year ago

UK pub operator Greene King posts lower profit on weak spending, higher costs

(Reuters) - British pub operator Greene King Plc (GNK.L) on Thursday reported an 11.2 percent drop in full-year adjusted pretax profit, hurt by softer consumer spending, higher costs and bad weather at the start of the year.

Shares of the pub operator, which owns ale brands such as Greene King IPA, Old Speckled Hen and Abbot Ale, fell as much as 6 percent in morning trade.

The company has been battling rising costs from the government’s minimum living wage increase, higher property prices and unfavourable currency exchange rates.

Greene King said it expected 45 million pounds ($58.83 million) to 50 million pounds cost inflation for the new fiscal year, as several industry-specific input costs continue to rise ahead of headline inflation.

The company also said consumer confidence remained fragile, despite a slight improvement since the end of last year.

“The current trading environment is still characterised by subdued consumer confidence, intense competition and rising costs,” the company said.

Greene King, founded in 1799, operates 3,000 pubs, restaurants and hotels across the UK.

Comparable sales for Pub Company, Greene King’s key growth driver, fell 1.2 percent compared with a rise of 1.5 percent a year ago, due to slower food sales and higher costs.

Greene King said it was targeting a return to like-for-like sales growth for Pub Company in the new financial year, as it expects to save 30 million pounds to 35 million pounds.

The company said it has seen strong growth of drink sales recently as it gains from FIFA World Cup matches and better weather after a colder winter at the start of 2018.

Like-for-like sales at Pub Company were up 2.2 percent in the first eight weeks of the new financial year.

“We are starting to see the benefits from the World Cup, as more than half of consumers expect to watch an England game at the pub,” the company said.

Adjusted profit before tax fell to 243 million pounds for the year ended April 29, from 273.5 million pounds a year ago, but met the company’s April forecast of 240 million pounds to 245 million pounds.

Revenue fell 1.8 percent to 2.18 billion pounds.

Reporting by Sangameswaran S and Arathy S Nair in Bengaluru; Editing by Amrutha Gayathri, Bernard Orr

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