Greene King profit beats view

By Rhys Jones

LONDON (Reuters) - Pubs group Greene King posted a smaller-than-expected fall in full-year profit and said recent trade had improved, driven by increased food sales and sunnier weather, sending its shares higher.

Greene King, which has around 2,500 pubs in England and Scotland, on Thursday said pretax profit for the year to May 3 fell 15 percent to 118.5 million pounds ($194.8 million) on revenues 1.3 percent higher at 954.6 million pounds.

Analysts expected a profit of 116 million pounds, according to Reuters Estimates.

"Mortgage costs have come down and the cost of living has come down a bit too, which has helped. Whether this is green shoots of recovery I don't know because we're still cautious on the unemployment outlook," Greene King Chief Executive Rooney Anand told reporters on a conference call.

Shares in the group, which have risen by a third so far this year, were up 3.1 percent at 422.75 pence by 9:22 a.m., valuing it at around 833 million pounds.

The Suffolk-based group held its final dividend at 15.1 pence per share and said it would pursue a dividend policy of around two times underlying earnings in the future.

Greene King, which in April raised 207.5 million pounds through a rights issue to acquire pubs from struggling rivals and buy back debt, last month bought 11 pubs from Punch Taverns, Britain's biggest pubs operator, but said it was in no rush to spend more.

"We'll be opportunistic in how we allocate funds but we won't spend at such a great pace that we undermine our value," said Anand. "We are seeing assets being offered to us that would not, under normal circumstances, be offered."

Punch Taverns and Marston's have both launched rights issues in the last month.

"Greene King has the firepower to take advantage of developing opportunities," said KBC analyst Paul Hickman, who upgraded the company to "buy" from "hold".

Britain's pubs have been plagued by dire trading conditions as a toxic mix of the recession, above-inflation tax rises, miserable weather last summer, and cheap booze offers in supermarkets combined to keep drinkers at home.

Punch Taverns said it had seen a "modest" improvement in trading since March while Enterprise Inns said trading had been "steady" in the six weeks since the beginning of April.

JD Wetherspoon said trading in the quarter to end-April had been strong and Marston's last month said recent trade had improved as food sales grew.

Greene King's managed pub estate saw like-for-like sales rise 5.2 percent in the first eight weeks of its new business year, while its Belhaven pub business recorded like-for-like sales up 10.2 percent. Own-brewed beer volumes were up 12.1 percent.

(Editing by James Davey, John Stonestreet)