Trading 'positive' at Greene King

PUBS and brewing group Greene King yesterday reported “positive trading” across all its businesses yesterday in a final update ahead of its annual results.

Bury St Edmunds-based Greene King said margins had remained “strong” during the 51 weeks to April 23, with the group's overall performance being in line with expectations.

Like-for-like sales within the managed pub division were 1.8% ahead and those from the leased and tenanted division were up by 2.1%.

Total beer sales were up 7% by volume, with Greene King IPA up 4%, Abbot Ale up 5% and Old Speckled Hen up 9%.

Greene King also said that the integration of the Scottish-based Belhaven business, acquired last summer, had run smoothly and was on course to achieve synergy targets.

The group said it was pleased with Belhaven's trading since the introduction of Scotland's ban on smoking in public, although it was “still very early”. Sales of Belhaven Best were up by 8.6% in volume over the 51 weeks, Greene King added.

Greene King also yesterday announced the securitisation of a further £550million of bank and debenture debt.

The group completed its inaugural securitisation in March 2005, issuing £600million of investment grade bonds, backed by just under half of its pub estate at the time.

It said yesterday that, following the acquisition of both Belhaven and TD Ridley & Sons during 2005, it had decided to refinance more of its debt into order to improve its financial flexibility and enhance shareholder value by taking advantage of longer-term, lower-cost bond finance.

“Whilst our total debt remains unchanged, the further £550million of bond finance will take the overall outstanding Greene King bond issuance to £1,137million, backed by approximately 70% of its pubs,” said the group.

“The further bond finance has today been priced at advantageous rates, and the transaction is expected to be completed next week, when the funds raised will be used to partially re-pay the group's existing loan facilities.”

Greene King added that, as with the original bond issue, there had been an “excellent” response from investors towards the bonds, backed by its trading record, its high-quality freehold pub assets and the flexible structure which allowed transfers of pubs between managed and tenanted formats.

As a result of the bond issue, there will be an interest saving going forward, of approximately £2.7 million a year. The refinancing and bond issue will result in a one-off exceptional charge in the 2007 financial year of approximately £6.1 million net of tax as a result of the redemption of debentures and the cancellation of fixed rate swaps no longer required due to the issuance of fixed rate bonds.

Rooney Anand, chief executive of Greene King, said yesterday: “Trading across the group has been positive and we remain on course to achieve a successful outcome to the year.

“At the same time, we have completed another successful, innovative financing exercise, achieved at attractive interest rates for Greene King. Going forward, the strength and efficiency of our capital structure will give us greater flexibility to invest for future growth and to enhance shareholder value.”

Greene King's results for the year to April 30 and due to be published on July 4.