Greene King abandons property spin-off

Greene King, the pubs and brewing group, has halted plans to spin-off its property interests due to the current problems in the debt and property markets.

Greene King, founded in 1799, said profits in the 24 weeks to 14 October increased 7% to £71.6 million while sales grew 6% to £445 million.

Rooney Anand, the group’s chief executive, said the results were good in a ‘very awkward environment’. He continued that clearly since the middle of the summer, the US debt crisis and concerns over UK banking have had some impact on consumer confidence and spending. We expect the remainder of the year to be more challenging.

Earlier this week, two major players in the leisure sector issued gloomy forecasts and it is expected that pubs, nightclubs and restaurants are in for a bleak Christmas. Regent Inns lost more than a third of its stock market value as it warned annual profits will be no better than those issued in 2006.

Furthermore, Clapham House, the chain that owns the Gourmet Burger Kitchen and Bombay Bicycle Club, fared even worse. Other major players who aren’t performing well include Mitchells & Butlers, Enterprise Inns, The Restaurant Group, Individual Restaurant Group and Domino’s Pizza.

Greene King, which owns 2600 drinking venues and some of the most popular beers in the UK, including IPA and Old Speckled Hen, said in the summer that it was looking at a shake-up of its structure but has announced that these plans are on hold for the time being.

IPA remains the biggest-selling cask ale, helped by sponsorship of the England rugby team and a tidy marketing campaign. It has another 3 years to run as the official beer of England rugby.

Greene King bought Loch Fyne fish restaurants for £64 million in early 2007 and has recently spent £126 million buying back over 8% of its own shares.

The group has investigated 3 options to make more of Greene King’s property, spinning the pubs into a real estate investment trust (Reit), creating an OpCo/PropCo with a joint-venture partner or extending the current securitisation deals on its property. However, these options are now ‘relatively less attractive’ but will be kept ‘under review’ according to the firm.

Story link: Greene King abandons property spin-off