This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Greene King management may well be toasting the recent good weather and England’s World Cup success, with Pub Company Sales up a sparking 2.2% like-for-like in the last 8 weeks, but the future is perhaps not so bubbly for them or investors. Or drinkers for that matter. And not just because of that global shortage of CO2.
That +2.2% is much improved on the -1.7% like-for-like growth reported for the segment for 2017/18 (-1.2% when snow impact excluded). And the second half of last year was better than the first, even after that snow. But full year adjusted profits still fell a whopping 11.2% dented by exceptionals and the final dividend has been kept flat. Hardly a confidence booster for investors.
More importantly the latest guidance hints at £45-50m more cost inflation in 2018/18, keeping margins under pressure. And with management only targeting cost savings of £30-35m this won’t be enough to overcome said inflation, unlike last year. Not good for margins.
The result is that even hopes of like-for like growth in its Pubs segment in 2018/19 – as opposed to last year’s contraction – is falling on deaf ears and the shares are back sharply from near 9-month highs, retracing a hefty chunk of their recent 42% bounce from April lows.
Where the shares go from here could be dependent on how far England makes it on the journey to Moscow.
Mike van Dulken, Head of Research, 28 Jun 2018
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.
Prepared by Michael van Dulken, Head of ResearchComments are closed.