Greene King posts bigger profit after Spirit Pub deal

By Esha Vaish

(Reuters) - Greene King Plc (GNK.L), enlarged by its acquisition of Spirit Pub, posted a better-than-expected half-year profit as more Britons dined out and drank the cask ales sold at its 3,000-plus pubs, restaurants and hotels.

Shares of Greene King, which brews ales such as Old Speckled Hen, rose as much as 10 percent on Wednesday and were on track for their biggest one-day gain since January 2009.

The Suffolk-based brewer also said it is shipping 50,000 cases of its Greene King IPA to China, where its India pale ale has surged in popularity since President Xi Jinping drank a pint with British Prime Minister David Cameron during a recent visit to the UK.

Greene King's 774 million-pound acquisition of Spirit Pub, the biggest deal in its 216-year history, is helping the company to better compete with rivals such as Marston's Plc (MARS.L), Mitchells & Butlers Plc (MAB.L) and J D Wetherspoon Plc (JDW.L).

Many of the old Spirit brands, such as Hungry Horse and Flaming Grill, were among the first to put an emphasis on serving food. These 'food-led' pubs tend to make more money than outlets where drinks account for a larger proportion of sales.

Citing better deals from suppliers, Chief Executive Rooney Anand said Greene King now expected the Spirit acquisition to yield savings of 35 million pounds, more than its initial guidance of 30 million pounds.

Christmas bookings have been strong, Anand told Reuters.

After adjusting for exceptional items, pretax profit rose 47 percent to 121.3 million pounds for the 24 weeks ended Oct. 18. Analysts on average had expected pretax profit of 102.4 million pounds, according to Thomson Reuters I/B/E/S.

The Spirit acquisition was not the only reason for the increase: like-for-like retail sales rose 2 percent, with the Rugby World Cup helping to bring in more customers.

At least three analysts raised their full-year profit or earnings per share expectations for Greene King. Numis hiked its full-year pretax profit forecast to 251 million pounds from 241 million pounds.

"The song goes that the first step is the hardest, but Greene King has made it look easy," Canaccord Genuity analysts wrote in a note. "Greene King is now a much better investment proposition."

Greene King's stock was up 9.4 percent at 931 pence at 1200 GMT, making it the top gainer on the FTSE-250 midcap index (.FTMC).

(Reporting by Esha Vaish in Bengaluru; Editing by Anand Basu and Robin Paxton)