Greenalls to raise pounds 86m through rights issue

THE remoulding of Greenalls Group, the pubs and hotels company, is being taken a stage further via an pounds 86m cash call.

The one-for-five rights issue, pitched at 295p a share, will in effect give Greenalls pounds 125m of flexibility on the balance sheet, which it can spend on acquisitions.

That flexibility comes through a reduction in gearing from 27.5 per cent to a post-rights 14.5 per cent. Greenalls said it would not be unhappy if gearing went back up to 30 per cent on shareholders' funds of pounds 760m.

Greenalls accompanied the rights with a profits estimate for the 1991/92 year, which ended last month. Forecast pre-tax profits are pounds 63m, including pounds 6m of property disposal profits. That compares with last year's figures of pounds 64.1m and pounds 10m respectively.

The flat results reflect the effects of the recession and poor summer weather which has depressed the pub trade.

Despite that, the company intends to pay a 6.93p final dividend, lifting the total payout by 7 per cent to 11.77p.

Explaining the rationale behind the rights, Andrew Thomas, chairman and chief executive, said: 'In the Eighties we had investments in a wide variety of businesses, and it was not possible to advance on all fronts.

'We have been indicating that any issue of shares would be linked to a specific acquisition, but it has become clear that our shareholders' interests could best be served by raising money now for deals done, and for deals to be done.'

The main changes over the past three years have seen Greenalls withdraw from brewing and update its share base by abolishing a two-tier equity structure which enabled the family to keep control. The family has just over 16 per cent of the company, which will fall to less than 14.5 per cent if it does not take up its rights.

Greenalls has spent more than pounds 86m on acquisitions in the last year alone, including pounds 20m on buying Blaney's off-licences, pounds 10m on the purchase of the Belton Woods hotel and golf complex, and pounds 10m on buying 39 pubs from Allied-Lyons.

Greenalls has 1,400 pubs, but said further purchases would depend on quality. Most of the pubs sold in the run-up to next month's deadline for complying with the Government's Beer Orders 'have not fitted our criteria', Mr Thomas said.

'We had looked at about 1,000 pubs before the Allied deal, before cherry-picking 39 character houses, with potential for food sales.'

The emphasis on the De Vere hotels side will be on the four and five-star market.

Greenalls wants to sell its six US hotels and reduce its UK exposure in the three-star market. It has written down the value of its US hotels by pounds 15m and its UK sites by pounds 35m.

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