Sluggish Greene's Morland holding queried

RECOVERY at Greene King, the East Anglian brewer and pub owner, has remained slow and has raised further questions about the logic of retaining a pounds 30m shareholding in Morland, the rival Oxfordshire group, writes John Shepherd.

Simon Redman, chairman of Greene, which yesterday reported a 1 per cent rise in annual pre-tax profits to pounds 20.4m, said: 'We haven't changed our position on the Morland stake, but we will avoid another hostile bid if possible.'

Morland overcame seemingly impossible odds in the summer of 1992 to escape the pounds 100m takeover bid from Greene, leaving it with an unwanted 29.9 per cent shareholder. Morland is valued on the stock market at pounds 105.5m, and Greene at pounds 191m on yesterday's unchanged share price of 453p.

Some analysts believe that Greene would be better off turning Morland shares into cash and investing the money in its own businesses. It costs Greene a net pounds 600,000 a year to hold the stake.

The East Anglian beer market has endured the worst ravages of the recession, and over the past year Greene has had to battle hard against heavy price discounting by Bass and Courage.

'The recovery still seems to be patchy and somewhat fragile. Brewing and wholesaling suffered from very competitive market conditions, which now show some signs of easing,' Mr Redman said.

He joined the call to the Government to cut taxes on beer to stop the flood of cheap drinks being brought back from France.

'In a so-called single market it is imperative that duty rates are similar in all countries.'

Against a 2.5 per cent drop in beer consumption nationally in Greene's financial year, drinkers in East Anglia downed 7 per cent less than in the year before. About 60 per cent of Greene's brewery output is consumed in East Anglia.

Greene has made the first divisional split of its results, although there are no comparisions. Brewing and wholesaling made trading profits of pounds 6.9m on sales of pounds 61m, while the 676 tenanted pubs turned over pounds 39.7m and contributed pounds 15.2m. The retail arm, which includes 196 managed pubs, earned pounds 10.5m on sales of pounds 45.4m.

The dividend is being raised from 12.3p to 12.9p, covered almost three-fold by earnings per share of 36p.

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