Greene King: Fit for the future?

A passing remark from Greene King chairman Tim Bridge in the brewer's results announcement - that the Suffolk brewer had made no acquisitions during the recent financial year - underlined the group's approach in what proved to be a trying 12 months.

In recent years Greene King had been aggressively acquisitive, snapping up businesses such as Ridley's in Essex, Belhaven in Scotland, fish restaurant chain Loch Fyne and Nottingham's Hardys & Hansons, and paying - according to some observers - more than top dollar for such assets.

That the group effectively kept its purse strings tied and its corporate head down during one of the most turbulent years the industry has seen in a generation suggests it has been more focused on getting its own house in order than wooing other businesses and bolting them on.

Paying off

It is a strategy that appears to have paid off. The group is stronger now than before the onset of the recession thanks to the implementation of various structural and cultural changes across the business, according to chief executive Rooney Anand.

That said, he still has the air of a man under the microscope. Despite buying Scottish brewer Belhaven more than four years ago he remains sensitive about the negative observations made at the time of the deal.

"Look back and see what people were saying about us when we did that," he says, stressing that Belhaven remains a "great business with room for growth and more upside".

By tweaking the Belhaven portfolio and growing food sales - now 25 per cent of revenue, versus nine per cent pre-acquisition - Anand's optimism appears well placed, the only fly in the ointment being the likely fall in the number of people employed in Scotland's public sector as inevitable spending cuts bite in the next year.

While publicly cautious as to the future of the economic and political landscape, Anand is nevertheless confident that a number of structural changes across the overall business which have been implemented in recent years were coming good.

"The strategy has come to fruition," he says, "and the business is now far more actively managed."

Anand says a lot of work had already gone into altering how the group's businesses are presented to the consumer, and that this has continued during the recessionary environment. "We want to offer value for money that doesn't cheapen the Greene king brand or erode margins," he says.

Support for tenants included a range of non-financial measures, but Anand pointed to more than £4m of financial help during the year, delivered on the condition "our licensees change elements of their business to increase their consumer appeal".

The brewing arm saw an improved performance in the second half, and not just thanks to volumes through JD Wetherspoon's 99p-a-pint of IPA, then Ruddles, promotion. "We've seen net growth anyway," he said.

Good shape

Anand's overall assessment of what he describes as 'his' company is that its "vital signs" are in good shape.Capital investment, essential for the ongoing health of any business, has not been cut. Indeed, £90m was spent on the group's estate last year. Just shy of £47m was spent repaying net debt with net cash generated of £23.7m.

The recent rights issue, which bolstered Greene King's balance sheet by more than £207m, will certainly help improve its debt profile. "We can pay back twice as much debt now as we were able to a year ago," Anand said.

And boost its acquisitive capabilities, presumably. "We'll be active in buying and selling pubs. The industry is undergoing a Darwinian distortion and disposing of poor performing assets is part of what we do.

"We have paid what I believe to be a fair price for top quality assets," he adds, referring to the recent purchase of 11 managed pubs from Punch Taverns for £30.4m.

It all adds up to a corporate argument that is well set for the future, he believes. "I've been saying 'fit for the future' for the past two years and that remains the case," he says.

"I'm under no illusion that the economy has yet to come out of the woods, but in the last 12 months my business feels like it is making progress."