UPDATE: Greene King To Grow Managed Pubs, Trim Leased Estate

1st Jul 2010 08:20

(Adds detail.) By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. pub group Greene King PLC (GNK.LN) said Thursday it would grow its estate of managed pubs while shrinking its tenanted pub estate in an effort to increase its exposure to the more profitable eating out market. The Suffolk-based brewer and pub owner also said its pretax profit before exceptional items was GBP123 million in the year to May 2, up 3.8% from GBP118.5 million the previous year and in line with analysts' expectations. The company said it had decided to accelerate the pace of its change to focus more on retail and key brands. To do this it plans to grow its managed pub business by a quarter to around 1,100 pubs over the next three to five years. It currently operates 888 managed pubs. The company has brewed and owned pubs for over 200 years and manages its own pubs and restaurants in addition to renting out tenanted pubs across the U.K. Greene King's managed pub business includes the brands Hungry Horse, Old English Inns, Loch Fyne Restaurants and Eating Inn, all focused on the sale of food rather than drink. The growth in the managed business will be achieved through both acquisitions and internal transfers from the tenanted business. The acceleration of the retail expansion will be financed through the company's existing funding facilities, the remains of last year's rights issue proceeds and an accelerated tenanted disposal program. In April last year, Greene King raised GBP207 million through a discounted rights issue in order to buy up cheap pubs from its distressed rivals as well as buy back some of its debt while the climate was favorable. The company said Thursday it will cut the estate of pubs it leases to individual landlords to 1,200 from 1,584 and increase investment in its core beer brands. The reduction in the tenanted estate will involve some disposals, as the company seeks to improve the overall quality of its estate. "This strategy will generate faster, profitable sales growth and increase our exposure to the long-term growth of the eating out market," said Chief Executive Rooney Anand in a statement. Anand said the company had an encouraging start to the new financial year with trading to date better than he was expecting. Comparable sales in the managed business grew 6% in the first eight weeks of the new financial year, with sales in Scotland up 1.5%. The tenanted estate continued to stabilize with average profit per pub broadly in line with last year. The plan to only operate high quality, sustainable pubs supported by better control and direction from the group, will ensure the division moves back into sustainable per-pub profit growth in the next 12 to 18 months, said Anand. The U.K. pub industry has been in decline for several years as consumers drink less beer and because of the ban on smoking in public places. Greene King has fared better than some rivals, focusing on producing traditional ales and growing its own pub business through branding and offering more food, wine and coffee. Uncertainty in the market remains, however, and the company's shares are little changed from a year ago, at 0710 GMT trading flat at 393p. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires July 01, 2010 03:20 ET (07:20 GMT)