Profile: Pulling the profits

It sounds like a dream finance job – being the FD of a successful brewery. Good pay, good beer and, for Greene King in the past week or so, good interim results.

All seems to be going well for Michael Shallow, the man who holds down the FD job. He has been on the Greene King board since 1991. Previously, the 49-year-old had been at Kingfisher and Accenture.

Based in Suffolk, the 205-year-old brewery and pub owner is home to exotically-named beers such as Old Speckled Hen (a beer with its own website), Hen’s Tooth and Strong Suffolk Vintage Ale. Last week, it posted encouraging financial results for the 24 weeks to 17 October this year.

Greene King reported a 20% increase in profit, with pre-tax profit up from £35.6m to £42.7m. This was an increase of 15%. Turnover was up as well, by 22% to £314.4m.

The share price had been gaining steadily throughout the year, outperforming the FTSE250 over the past 12 months, and the dividend payment was up by 10%.

Results worth raising a glass to, especially given the dismal summer (weatherwise) and the seasonal impact that has on drinking patterns, even in a nation of binge drinkers.

And Shallow was re-elected to the board at the company’s agm this September with a majority that would make even a Ukrainian presidential candidate blush.

It has been a busy year for Greene King. In September, it completed a £654m acquisition of 432 ‘community and traditional town pubs’ from Laurel in a deal that boosted its estate by a quarter. The deal was funded through increased bank borrowing, and the company saw off Wolverhampton & Dudley and Punch Taverns in what is an increasingly competitive market.

But even with such a rosy past 12 months, it is not at all clear whether Greene King’s glass is half-empty or half-full. There is a big problem on the horizon, one that goes way beyond balance sheets and takeovers – and that’s smoking.

From 2008, the UK government has committed itself to a partial ban on smoking in English restaurants and pubs that serve food.

The plan has prompted concerns from publicans that many pubs will stop serving food in an attempt to not upset smokers.

The industry is already worried about how that will affect profits, and Greene King has been particularly vocal in its concerns. It has called for village pubs to be made exempt from the proposed ban.

Tim Bridge, Greene King chief executive, has asked ministers to understand that many village pubs need to cater for smokers and non-smokers, diners and drinkers alike, and wants these pubs to be allowed to retain a well-ventilated room for smokers. ‘It would be helpful to a lot of village pubs,’ he said.

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