Bottom Line: Greenalls a good read

GREENALLS GROUP, criticised for scant financial detail during the Devenish takeover, laid on a feast of numbers in the shape of a 30- page release for its annual results. It makes good reading.

Underlying pre-tax profits in the year to 24 September rose 19.4 per cent to pounds 68.3m and there is some good news from hotels while Devenish has not yet unleased any nasty surprises.

Of Greenalls' six divisions, only profits from drinks and leisure fell. But the drop from pounds 6.2m to pounds 5.6m masks a sharp recovery in the second half and its cash-generative qualities.

Operating profits from pubs, excluding Devenish, rose from pounds 47.5m to pounds 50.3m, a 10 per cent return on net assets. Food sales climbed 17.2 per cent, more than compensating for the continued decline in beer consumption.

Food, averaged out across the 2,000 strong estate, accounted for 17 per cent of turnover. Branded pubs and restaurants and lodges made pounds 10.1m, up from pounds 8.4m.

Devenish chipped in a seasonally favourable two-month contribution of pounds 4.8m. Post-acquisition cost savings exceeded forecasts at almost pounds 4m, and there is more to come.

In hotels the De Vere chain, with 3,000 rooms, lifted occupancy levels from 60 to 67 per cent and profits from pounds 14.2m to pounds 15m. Room rates fell only pounds 3 to pounds 45 and appear now to be firming. A prudent pounds 47m has been lopped off hotel values to pounds 248m.

Group cash flow is strong, and Greenalls can easily afford pounds 100m this year for refurbishing, upgrading and bolt-on purchases.

Analysts have upgraded forecasts for 1993/94 to pounds 84m. Earnings per share will grow only slightly to 28.7p but this dispels fears about dilution from the Devenish deal. Shares, up 2p to 407p, sport a p/e of 14.2 and yield 4 per cent on a forecast rise in dividends from 12.36p to 13p. Good value.