Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

Greene King Sales Boosted by 2018 Heatwave

Pub chain behind Greene King IPA and Old Speckled Hen posts rise in sales and revenue, although a wetter May and June - and no World Cup - will make it harder to match this 

James Gard 27 June, 2019 | 1:36PM

Greene King pub

Greene King (GNK) shares fizzed up 3% after the FTSE 250 pubs chain reported a rise in sales in the last financial year, thanks to a summer heatwave and the footbal World Cup. 

Group revenue for the year was 1.8% higher at £2.2 billion although pre-tax profits dropped 12.5% to £172 million. The fall in profits was attributed to a rise in one-off outlays linked to the company’s properties costing the firm £90 million. Excluding exceptional items, pre-tax profits were up 1.6% to £246 million. Net debt has edged down from £2 billion to £1.94 billion.

Edison analyst Russell Pointon said the firm's decision to hold the dividend at 33.2p – a yield of 5.5% – will be a relief to investors after speculation that the payout would be cut. However, he added: “It is probably too early in the newly-appointed chief executive’s reign to see any change”. The stock is held by a number of income ETFS, including the one-star rated SPDR S&P UK Dividend Aristocrats (UKDV), where Greene King makes up more than 4% of the portfolio.

Among open-ended funds, Greene King makes up 2.6% of the Rathbone Income fund, which has a Morningstar Analyst Rating of Bronze. SLI UK Equity Unconstrained, which also has a Bronze Rating, holds the firm as more than 3% of its portfolio.

Recent wet weather in May and June has dented sales in the new financial year, said chief executive Nick Mackenzie, who joined the firm from Madame Tussauds owner Merlin Entertainment on 1 May. Analysts say that last summer’s sales boost from the hot weather and the World Cup will be hard to repeat. 

After the annual results, two City brokers reiterated their “buy” recommendation for the stock – Liberum Capital has a price target of 790p and Peel Hunt has a target of 800p. The current share price is just below 600p.

Greene King has a range of beer brands including its stalwart IPA, whose sales were boosted when visiting Chinese premier Xi Zinping was seen drinking the pale ale in a state visit to the UK in 2015. Its Old Speckled Hen brand launched a 0.5% alcohol version this year to tap into the growing demand for zero and low alcohol beers. Ed Monk, associate director at Fidelity Personal Investing, said: "[The firm's] strategy now involves appealing to more ‘well-being’ conscious millennials, including offering up healthier food options.”

 

 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Greene King PLC842.00 GBX-0.12
Rathbone Income R Acc1,583.72 GBP0.04
SLI UK Equity Income Uncons Plat 1 Acc102.50 GBP0.59

About Author

James Gard  is content editor for Morningstar.co.uk

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites