The Investment Column: Greenalls full of good ideas

GREENALLS was slow to catch on to the huge investment put into the branded pub market by its competitors. But it is finally doing the right thing and trying to catch up, and underlying operating profits rose 8 per cent to pounds 89.7m in the six months to March.

Plans to exploit the buoyant budget hotel market by building a third more rooms at its Premier Lodge chain make sense, as does a move to set up its own up-market health and fitness business to complement the existing Village family leisure complexes.

Along with the rest of the sector, it had its profits dampened by poor spring weather, although customers have returned in their droves with the warmer weather.

With the consumer economy and retail sales showing signs of a downturn and customers in its main trading area, the North-west, feeling the full impact of the strong pound, Greenalls is not going to produce great growth. That said, it appears to have put its main problems behind it.

Merrill Lynch forecasts full-year profits of around pounds 163m, putting the shares, which slipped 14.5p to 487p yesterday, on a prospective PE ratio of 12. The shares have risen by about 10 per cent since we tipped the group as one of our stock of the year, and they remain good value.