Greenalls on brink of shareholders' revolt

Greenalls, one of the largest pub groups in the UK, yesterday shocked the stock market with a profits warning. Andrew Yates finds that the group could face a shareholder revolt if it fails to reverse the recent sharp decline in its share price.
Institutional shareholders in Greenalls yesterday expressed concerns about the future direction of the group after it said that trading at its managed pub estate had been flat over the summer months.

Greenalls shares tumbled 37.5p to 414p as analysts rushed to downgrade pre-tax profit forecasts for the year to September by pounds 10m to around pounds 154m.

Greenalls shares have had a dreadful run, falling from a high of 633p last year and underperforming the stock market by almost 40 per cent over the past 12 months.

One leading drinks analyst said: "There could be real pressure on Greenalls' management from shareholders if they do not improve the group's performance soon.

"They seem to have taken their eye off the ball when they purchased Boddington and that is very worrying."

Another analyst said: "They should be achieving high single-figure growth a least in their managed pub chain like other in the industry. This trading statement came as a big shock."

Lord Daresbury, Greenalls chief executive, said: "We are disappointed with the pub results. Our managed pub trade has been sluggish since the start of the summer. Some of our secondary community pubs have underperformed and that is where we are focusing our efforts now."

Greenalls joined the FTSE 100 index after its acquisition of Boddington, the pub and hotel group, in November 1995. However the group, which has more than 2,200 pubs in its estate, was ejected from the FTSE just three months later and its share price has plummeted ever since.

Greenalls said it had suffered from not spending enough money improving its pub chain while it integrated the acquisition of Boddington. It lost trade to competitors who were busy pumping millions of pounds into their own estates.

Greenalls plans to accelerate its capital expenditure programme and has earmarked more than pounds 100m for its pubs this year, developing its branded chains such as Henry's Cafe Bar and Millers Kitchen.

Analysts point out, however, that the group has spent pounds 80m on its estate in the past 12 months and has got little to show for it.

"If this spending spree does not produce a decent return the group could face a shareholder revolt," said one analyst.

Greenalls also said trading in the North-west, where it has 50 per cent of its estate, continued to be very difficult. It has decided to transfer another 79 managed pubs to its franchised and tenanted estate in an attempt to reverse the poor performance at these sites.

Greenalls' chairman, Andrew Thomas, has also presided over a rapidly declining share price at Limelight, the troubled bathrooms and kitchens group that has been a disastrous performer since it floated last year.