Flat prospects at Greene King

Investment: Consolidation may be the only option for the regional brewing sector

THE REGIONAL BREWING sector, for so long the dullard of the pub and brewing industry, is suddenly starting to look interesting. With Wolverhampton & Dudley embroiled in a hostile bid for rival Marstons, and Greene King tipped as a possible "White Knight" bidder, the long-awaited consolidation of the market could finally be under way.

Certainly a glance at Greene King's half-year figures yesterday suggest action is necessary. Trading profits were up just 5 per cent to pounds 27m on sales up 2 per cent to pounds 134.5m. Like-for-like sales in its managed pub estate are running 3 to 4 per cent lower than last year and trading is said to be "patchy and unpredictable" in the face of weakening consumer demand. "It seems that consumers do have the money, but are frightened to spend it," said Greene King's chief executive Tim Bridge, adding that food sales are slightly weaker than drink.

All this has contributed to the shares under-performing the market by 23 per cent over the past 12 months. They have fallen from over 750p in the spring to 537.5p, down a further 1.5p yesterday.

Like other regional brewers Greene King's problem is that it is caught between the powerful big brewers, such as Bass and Scottish & Newcastle, on the one hand and the new, nimble pub companies on the other. The regional brewers cannot match the marketing spend of the big boys while the new pub companies, such as Regent Inns and JD Wetherspoon, are nibbling away at their margins.

This has led to analysts and investors shunning brewers valued at less than pounds 500m, leaving the shares trading on lowly ratings. As one sector- watcher put it yesterday: "Greene King is a small, low-growth business operating in a mature sector. It is just a case of trying to make the best of what its got."

To be fair to the company, it has been trying to do just that. Its decision to pull out of lager production last year now looks wise as Greene King could not possibly match the marketing muscle behind top brands such as Carling Black Label and Stella Artois. It has also jettisoned its Irish ale, Wexford Cream, after sales started to fall sharply.

Its beer volumes are out-performing the market and its main ales, Greene King IPA and the stronger Abbot ale, increased sales by 2 per cent in a cask conditioned market 10 per cent down.

In managed pubs the group is concentrating on acquiring and developing community pubs to the Hungry Horse brand, which offers lower-priced food. So far there are 90 Hungry Horse pubs with a further eight sites secured for the second half. However, there have been some concerns that a large investment bill for refurbishment is looming.

In the tenanted estate, which was boosted by the purchase of 43 Beards of Sussex pubs this year, profits were up 4 per cent although the benefits of an investment programme will only be felt in the second half.

Greene King may yet enter the fray for Marstons although analysts said Morland, which it took an unsuccessful tilt at a few years ago, remains its most obvious partner.

Although the shares trade on a forward multiple of just nine, analysts said the outlook remains unexciting.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'