Greene King reassures by sticking with guidance against tough backdrop

Greene King expects pre-tax profit to come in between £240m and £245m - PA

Greene King has stuck to its profit guidance, shrugging off any expectations of a downgrade, in what will come as a blow to short-sellers who had been circling the group.

Shares in Greene King rocketed 13.6pc on the trading update, adding almost £200m to its market capitalisation over the course of the day. 

Some had been expecting Greene King to follow peer Mitchells & Butlers and announce plans to ditch its dividend, given recent talk of difficult trading conditions in the pub industry, including higher business rates and wages.

Data released earlier this week, from Barclaycard, appeared to reinforce the gloomy view of the industry, with year-on-year spending growth at pubs having come in at one of its slowest rates ever recorded.

However, instead, Greene King reiterated profit guidance for the year to the end of April, saying it expected pre-tax profit to come in between £240m and £245m, in line with consensus.

It said it continued to expect to spend around £160m on its estate over the full year, and noted that its dividend was "sustainable". 

The upbeat update is likely to have caught those who have been building short positions in the group off guard.

Currently more than 10pc of Greene King is out on loan to short-sellers, who take holdings in a business in anticipation of its share price falling. Those investors will have taken a paper loss of around £20m on the update. 

Signs that the pub industry may not be in as much danger as expected were also apparent at smaller operator City Pub Group, which posted a 35pc revenue rise in its first set of annual results since joining London's Aim market.

City Pub said its profit before tax, stripping out exceptional items including costs from its float, doubled to £3.2m for 2017.

Its chairman Clive Watson said: "In common with all in the hospitality industry, there are challenges such as rising employee costs, business rates increase and uncertainty around Brexit. Increasing sales, scale and efficiency will mitigate the bulk of these."