Analysts look for steer after Orchid deal collapse

GREENE King, the Suffolk-based brewer and pub operator that owns Dunbar-based Belhaven, is expected to lay out its revised plans for growth this week after losing out on a key acquisition two months ago.

Pulled out: Rooney Anand. Picture: Contributed
Pulled out: Rooney Anand. Picture: Contributed
Pulled out: Rooney Anand. Picture: Contributed

The Bury St Edmunds-based group, which can trace its history to 1799, pulled out of a deal to buy 173 pubs from Orchid last month. They were sold a month later to All Bar One owner Mitchells & Butlers for £266 million.

Analysts will be looking for a steer on the group’s plans in the wake of the Orchid deal when the company reports full-year figures on Thursday

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Pub groups such as Greene King, whose brands include Hungry Horse and Loch Fyne Seafood & Grill, are trying to weed out less profitable pubs from their estates, which are often tenanted rather than managed. Greene King employs 23,000 staff and has about 2,200 pubs, including some 1,000 in its managed estate. At the beginning of May Greene King sold 275 tenanted and leased pubs to Hawthorn Leisure for £75.6m.

Four years ago Greene King set itself the task of cutting down its tenanted pubs to 1,200 from almost 1,350, but after the May sale it went further saying it would cut these types of pubs down to 750 by 2020. In contrast the firm wants to boost its managed pubs to 1,200, by adding at least 30 pubs a year, in the same period.

But when chief executive Rooney Anand pulled out of the Orchid deal he reiterated that his plans to expand the firm’s managed pubs remains in place. Brokers at Deutsche Bank said they will want to hear more about Anand’s plans for ditching its less profitable pubs and adding to the managed empire, which the failed Orchid deal would have done in one stroke.

The full-year market consensus for Greene King is for earnings of £326.1m on sales of £1.3 billion. In a pre-close trading update in April the company said it expected to meet expectations for the year.

It said like-for-like sales were up 4.1 per cent and volumes of its core own-brewed brands were up 4.6 per cent. Beer growth was driven by Old Speckled Hen, the UK’s leading premium ale brand, which recorded a volume increase of 12.5 per cent.

At the time Anand said the business had achieved “consistently strong trading in each of our businesses through the year”.

“This reflects the strengths of our business and the success of our strategy to move to higher growth areas in our markets and to improve the customer offer. We expect to meet the market’s full year expectations for profit, cashflow and the balance sheet”.

He also said the company saw the UK’s outlook was improving although customers were still spending cautiously.