Greene King and Spirit pubs step up new site plans

TWO of Britain’s biggest pub operators are stepping up their expansion plans as the City prepares to toast their performances over Christmas.

The Beehive Inn in Edinburgh's Grassmarket. Picture: Ian Rutherford
The Beehive Inn in Edinburgh's Grassmarket. Picture: Ian Rutherford

Greene King and Spirit Pub Company are this week tipped to be named as big winners over the festive period.

Greene King, which owns the Belhaven Brewery in Dunbar and the Loch Fyne Restaurants chain, enjoyed a 13 per cent rise in Christmas bookings as diners treated themselves to meals out.

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Tomorrow’s third-quarter trading update is expected to show a “strengthening” of like-for-like sales growth.

Douglas Jack, an analyst at Numis Securities, noted that the firm’s expansion was also “picking up”.

“The managed estate added 22 sites in the first half, with a further 25 expected in the second half,” he said. “2015 guidance has been raised from 49 to 62 new sites.”

Suffolk-based Greene King – which brews beers including Abbot Ale, Old Speckled Hen and its eponymous India pale ale (IPA), and is led by chief executive Rooney Anand – bought Belhaven in 2005 for £187 million and added Loch Fyne Restaurants in 2007 for £68m.

Belhaven makes beers including 80 Shilling, St Andrews Ale and Twisted Thistle at its site in East Lothian, as well as carrying out contract brewing for other companies.

Jack added: “Trading should be ahead after the third quarter, with easy, snow-affected comparisons lying ahead in the fourth quarter.”

Spirit – which owns brands including Chef & Brewer, John Barras and Taylor Walker – is expected to have continued outperforming the rest of the sector, driven by food sales.

Like-for-like sales at its managed pubs grew by 4 per cent in the eight weeks to the middle of October, against a backdrop of 1.2 per cent growth for the wider sector, Numis said.

Jack added: “Management now intends to start acquiring freehold pubs to add to its Fayre & Square and Flaming Grill brands, targeting a 20 per cent cash return.

“Reinvestment includes repositioning Taylor Walker and Chef & Brewer to being slightly more premium.”

Taylor Walker branded pubs include the Beehive Inn, Doctors, the Malt Shovel Inn and Milnes Bar in Edinburgh, and the Central in St Andrews, while Chef & Brewer’s pubs include the White Cart at Clarkston in East Renfrewshire.

Bars trading under the John Barras brand include Crofters, McCowans and Shakespeare in Edinburgh, along with Beechwood, Quo Vadis and Woodcutter in Glasgow.

Spirit was demerged from Punch Taverns in 2011 and completed a debt restructuring late last year.

Peel Hunt analyst Nicholas Baltram said: “The financial restructuring has addressed one of the issues that had been holding back the shares, namely lack of expansion liquidity.”

Spirit, which is run by chief executive Mike Tye, will deliver its first-quarter trading update on Tuesday.

James Ainsley, an analyst at Citi, said: “We expect a good trading statement from Spirit as the timing of public holidays should have been favourable to the industry, although potentially offset by mixed weather conditions. We now expect management to re-invest surplus cash in new units, especially behind the group’s value brands – Flaming Grill, Fayre & Square, and John Barras – in suburban areas.”

Ainsley added: “We think a re-rating is overdue and the shares should be trading more in line with peers.”