Greene King continues to reign

Analysts are predicting year-end sales to climb to £540m, outperforming expectations, with pre-tax profits up to £75m.

These estimates include the likely impact of new financial reporting standards, which have been integrated into the accounts by finance director Michael Shallow.

Under Shallow, Greene King initiated transitional arrangements for pensions standard FRS 17 and adopted the deferred tax rule FRS 19 in its previous financial year.

The group, which operates more than 1,600 pubs across the country and produces such well-known ales as Speckled Hen, Greene King IPA and Abbot Ale, has seen its share price rise from a low of 629p in February to resume trading near the 800p benchmark, recently as high as 785p.

The steady rise in the share price was no doubt sparked off by the release of strong half-year results in February, which revealed turnover had increased by 17% to £249m and trading profit by 11% to £47.6m.

Greene King chairman David McCall said at the time that he expected the quality of the business and the strength of its brands to stand the company in good stead ‘even if general trading conditions deteriorate’.

Bearing testimony to McCall’s bold statement is the fact that Greene King was named pub company of the year for this year and in 2002.

Growth at Greene King has been stimulated by a series of acquisitions over the past two years, particularly, the £67m purchase of Morrells of Oxford in 2002 and Old English Inns, acquired in 2001 for £104.8m.

Recently, Greene King has been linked with a possible bid for Eldridge Pope, the troubled West Country pub operator. It has also developed a new ale called ‘Beer To Dine For’, which ‘ is sold in Sainsburys, and it has revamped the packaging for its flagship ale brand Greene King IPA.

Making selective acquisitions and developing new brands is at the heart of the company’s strategy for generating long-term shareholder growth.

According to its FD Shallow, cash flow has been the ‘life blood’ of the company, allowing it to follow through on this strategy.

In its previous financial year, cash flow amounted to £58.5m and is likely to rise in 2003.

This year the company has continued with its policy of buying back and cancelling its own shares – a move it claims improves shareholder returns.

So far this year, almost 3% of the company stock has been bought back and cancelled.

A combination of innovative brands, prudent acquisitions and strong financial controls should help Greene King see healthy returns this year and keep shareholders happy.


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