Greene King (GNK)

[Asagi]

Hi,

Greene King is the country’s leading pub retailer and brewer, running over 3,100 pubs, restaurants and hotels in towns, villages and city-centre high streets across England, Wales and Scotland.
https://www.greeneking.co.uk/our-company/

Market cap: £2.25bn
Bid: offer 714.5p:715p
Book value: 606p
P/E (historic) 12.8
P/E (forecast) 10.1
yield (historic) 4.4%
yield (forecast) 4.6%

Dividends at the company have been increasing since 2010.

Last trading statement, 9th September 2016:
http://www.investegate.co.uk/greene-kin ... 00063746J/
Pub Company delivered like-for-like (LFL) sales growth of 1.7% including a strong start to the year as customers enjoyed the European Football Championships and better weather. Growth was driven by our Local Pubs estate.

In Pub Partners, LFL net income was up 4.5% after 16 weeks, while in Brewing & Brands, own-brewed volume declined 0.5% over the same period...uncertainty surrounding the UK's future withdrawal from the European Union has translated into a softening of some economic indicators and a reduction in consumer confidence. While the broader implications remain unclear, a number of recent industry surveys have flagged risks to leisure spend and we are alert to a potentially tougher trading environment ahead.

Last year's interims were published on 2nd December. I worry over minimum wage, input costs and business rate rises. But Greene King has a great product, no doubt.

Asagi (no position)

[simoan]

Hi,
Last year's interims were published on 2nd December. I worry over minimum wage, input costs and business rate rises. But Greene King has a great product, no doubt.

Asagi (no position)

I hold Marston's which I prefer to Greene King in this sector, although it's about 1/3 the size. In particular it looks cheaper on fundamentals and has a twice covered 5.8% yield. Of course, it suffers from the same headwinds you mention, but the outlook comments in this weeks results were not as downbeat as Greene King's appear to be:

Trading in the current financial year is in line with our plans, our new site development is on track, and there have been no material changes to market conditions that would impact upon our expectations for the full year.

Accepting there are wider concerns regarding the possible impact of Brexit on consumer sentiment and input costs as a consequence of sterling weakness since the vote; to date there has been no discernible change in the spending habits of our customers, and we have forward contracts in place for 2017 and much of 2018 which will mitigate the risk of higher input costs due to exchange rate fluctuation. We have planned for modest increases in business rates in 2017, but are protected from more significant increases by our low exposure on the high street and in city centres.

Of course, I also prefer their beer to Greene Kings .

All the best, Si

[jackdaww]

greene king interims are due 30 november .

directors have bought this year at 858/881/747 .

[Markblox]

Price now at 672p. Results were very good with an increased dividend of 6% if memory is correct.

[Asagi]

INTERIM RESULTS FOR THE 24 WEEKS TO 16 OCTOBER 2016

http://www.investegate.co.uk/greene-kin ... 00104862Q/

Adjusted EPS +4.3%. Basic EPS -4.0%.

Pub Company like-for-like (LFL) sales up 1.3%, ahead of the market

integration of Spirit:

Synergies expected to be £30m this year; original three year target in two years...
50 brand conversions completed; average sales uplifts of over 30%.

dividend +4.1%.

4.2x net debt to EBITDA; flexible and long-term debt financing..growth in all divisions and the synergy benefits from the integration. These have helped to offset increased cost pressures, particularly from the National Living Wage...The current regulatory environment is adding further challenges to the industry through the National Living Wage, the National Minimum Wage, the Apprenticeship Levy and the recent proposed increases in business rates. All these government initiatives will impact on costs and margins

as for current trading:

Trading in Pub Company since the period end has improved versus the trends seen in the second quarter.

but what we have not discussed is the 'tie' - tenanted pubs having to buy from Greene King's brewery.

The main impact on Pub Partners will come from the ability of licensees to take a Market Rent Only (MRO) option, or essentially, a commercial free of tie agreement. After three months of the Pubs Code, we had 24 potential MRO agreements, which is in line with our expectations. We remain of the view that MRO will not have a material impact on the group.

But people are drinking less these days.

Own-brewed volume fell 3.8% in a cask ale market down 5.4% and a total ale market down 3.1%

I'm not sure there is anything that Greene King can do about that. All-in-all, plenty of headwinds. That's reflected in the P/E, which displays not much expectation of growth. Looks like a FY P/E of 9.4, with a forecast yield of 5%.

Asagi (no position)