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Greene King remains majestic

Pub group Greene King's emphasis on food sales has meant a decent performance - despite strong headwinds
December 5, 2011

Despite such headwinds as high alcohol duty, tough consumer conditions and cheap supermarket booze, pub operator and brewer Greene King is coping well. Indeed, adjust for £20m in impairments related to some properties, as well as expenses from August's acquisition of the London Capital Pub Company, and underlying pre-tax profit rose 5.6 per cent year-on-year to £77m.

IC TIP: Buy at 471p

The food offering's performance is especially noticeable. Like-for-like food sales growth of 4.9 per cent helped boost the retail division's turnover 12 per cent to £368m - it now generates 70 per cent of group sales and the unit's total underlying sales rose 3.8 per cent. Meanwhile, the cash-generative brewing business - which sells 80 per cent of its output to pubs outside the group's estate - saw sales rise 8.5 per cent in the period to £83.1m, with operating profits here up 4.5 per cent to £16.3m. Chief executive Rooney Anand said the company would also be continuing its capital spending programme - the group invested £37.6m in the existing estate during the period, compared with £28.6m last year.

Evolution Securities forecasts adjusted full-year pre-tax profit of £149.7m, giving EPS of 51.8p (£140m and 48.1p in 2011).

GREENE KING (GNK)

ORD PRICE:471pMARKET VALUE:£1.02bn
TOUCH:470-47312-MONTH HIGH:519pLOW: 402p
DIVIDEND YIELD:4.7%PE RATIO:13
NET ASSET VALUE:428p*NET DEBT:161%

Half-year to 16 OctTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201048460.024.26.3
201152756.722.46.7
% change+9-6-7+6

Ex-div:19 Dec

Payment: 27 Jan

*Includes intangible assets of £730m, or 338p a share