Greene King announces major organisational revamp

Greene King has announced a major shake-up of its operation which will see its Scottish Belhaven pub and brewing businesses fully integrated with the rest of the company.

At the same time as it revealed half year profits of £73.1m, up more than 17 per cent, the Suffolk brewer said that from next month it was integrating Belhaven's 227 tenanted and leased pubs into its Pub Partners division, while the 106 managed pubs in the Belhaven estate would be folded into Greene King Retail.

On the beer side, Belhaven Brewing will be combined with the Greene King Brewing Company, a move which will see the departure of the latter's boss, Justin Adams, after five years with the group.

The new combined brewing operation will be headed by current Belhaven managing director Euan Venters and will retain both Bury St Edmunds and Dunbar production sites.

Greene King chief executive Rooney Anand said the move would lead to "a more streamlined organisational structure that will deliver faster decision-making, tighter control of our customer offer and a lower cost base".

Anand said that some of the estimated £1m of annualised cost savings that would occur as a result would be ploughed back into the group's pubs and beer brands.

He paid tribute to Adams' contribution over the last five years saying: "Justin signalled last year that after five years he would be ready for a fresh challenge outside of the group, will be leaving the business shortly. I would like to express my gratitude to him for his leadership of, and commitment to, Greene King Brewing Company over the last five years. He has made a great contribution to our business and leaves us with our very best wishes."

On first half trading Greene King said total turnover across its 784 managed pubs rose 5.5 per cent to £293.4m, with like-for-like sales up 3.8 per cent. Operating profits were up nearly 10 per cent at £57.2m.

Its 1,300-odd leased and tenanted pubs had seen turnover fall 1.2 per cent, although Greene King said EBITDA per pub rose two per cent to £25,300. The brewer said 95 per cent of the operation's sites were on substantive agreements. It said it would support in the short term those pubs that were "under most pressure" but that it would continue to dispose of the most underperforming sites, as well as invest in those with a future.

North of the border Belhaven saw total sales up 5.8 per cent to £76.4m, with operating profits up 10 per cent at £17.5m.

Greene King said margins across its brewing operation grew by 20 basis points to 21.6 per cent, helped by improved efficiencies. Total turnover was £46.3m, up 2.2 per cent, with operating profits up 3.1 per cent at £10m.

Current like-for-like trading across the managed pub estate was up 3.7 per cent, and in Scotland Belhaven's like-for-likes were up 3.3 per cent. Tenanted pub like-for-like EBITDA was up 0.6 per cent.

Brewing had seen own-brewed volumes down 3.2 per cent and Belhaven's beer volumes were up nearly five per cent.

Anand said: "We have achieved record interim revenues while growing both profits and margins, driven by industry-leading Retail like-for-like sales growth, further profit improvement in Pub Partners, another record performance for Belhaven and share gains in Brewing.

"We have performed well throughout the downturn and our strategy for growth, via expansion of our Retail estate, is making good progress. We are taking positive steps to maintain our momentum by further streamlining the business, reducing our cost base and continuing to invest in our assets and our brands.

Anand said the group expected a strong Christmas "based on an encouraging level of bookings, extended trading hours across our pubs and the value and quality of our offer.

"However, the broader trading outlook for 2011 remains uncertain; our industry will be challenged by a VAT rise in January, a further significant rise in duty in April and the impact of government spending cuts."

At a glance: Greene King's half year results - 24 weeks to October 17, 2010

Turnover: £484.1m, up 4.2 per cent

Operating profit: £110m, up 6.5 per cent

Pre-tax profits: £73.1m, up 17.1 per cent

Earnings per share: 25.2p, up 11.5 per cent

Dividend per share: 6.3p, up 6.8 per cent