Greene King expands with restaurants deal

Pubs and brewing group Greene King today revealed further expansion as it announced a strengthening trend in recent trading.

The Bury St Edmunds-based company is to buy Cloverleaf Restaurants, which operates in the north of England and the Midlands, in a deal valued at �55.8million.

The acquisition of the fast-expanding chain, which will have 12 sites operating by the end of the current financial year, means that Greene King will have fully utilised the proceeds of its �207million rights issue of new shares 18 months ago.

Greene King chief executive Rooney Anand said Cloverleaf's pub restaurant-style operation was well-positioned to capitalise on the growing carvery market.

'It is growing strongly both organically, with like-for-like sales growing ahead of our existing retail business, and through additional sites,' he added. 'There is a strong pipeline of new sites with a minimum of 10 additional outlets expected to open within two years.

'The acquisition, combined with a planned investment of around �25m in the first 10 pipeline sites, will utilise the remaining balance of our rights issue proceeds.'

News of the acquisition came within an interim management statement for the 38 weeks to January 23, in which Greene King said all its businesses had continued to trade well, with similar or slightly stronger growth trends than those reported at the half-year stage.

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'Trading in the last eight weeks has been influenced by the poor weather in December, which negatively impacted trading ahead of Christmas, with January seeing a positive impact due to improved conditions over last year,' said the company.

Like-for-like sales at the group's retail pubs division, its largest business, are now 3.9% up on the same stage last year, with Hungry Horse, its biggest retail brand, 10.3% ahead.

Food sales continued to lead the growth, with a like-for-like increase of 8.2%, although drinks and accommodation also both remained in growth.

Retail margins for the full year are expected to be slightly ahead of last year, Greene King added.

Within the group's tenanted pubs business, like-for-like earnings per pub were up 0.6%, amid a continuing focus on investment and customer service.

The Bury St Edmunds-based brewing division's own-brewed volumes were down 3.3%, but this was against the background of an overall 7.6% decline in the UK ale market.

Volumes for the group's core brands, Greene King IPA, Old Speckled Hen and Abbot Ale, were down just 1.0%.

Greene King added that the recently announced integration of its Scottish business Belhaven into its three main trading divisions was on track while cash generation and the group's balance sheet position remained healthy and in line with expectations.