The first-half performance for Bury St Edmunds brewer and pub company Greene King (GNK) was complicated by a one-off charge of £20m as the company lost the latest round of a tax tussle with HMRC, in addition to write-downs related to the value of some under-performing pubs. That aside, the good summer trading season meant that like-for-like sales in its core retail estate rose by 3.5 per cent and ensured that underlying operating profits ticked up by 3.7 per cent to £127m. However, the big question is whether running traditional tenanted premises is now worth the effort for Greene King.
The point is illustrated by the impact of the retail division since Greene King decided to expand into non-traditional areas, including restaurants and hotels. The retail division makes up just under half of the total estate, but the share of overall sales was over 70 per cent at £438m for the half. Chief executive Rooney Anand says the retail business currently has a structural advantage: the tenanted estate is far less flexible at passing on cost increases. As a consequence, he said the company will continue to dispose of tenanted premises until the estate is down to a target of 1,200 by 2015.
Broker Deutsche Bank forecasts adjusted pre-tax profits for 2014 of £175m, giving EPS of 62.5p, compared with the £162m and 57.0p achieved last time.
GREENE KING (GNK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 869p | MARKET VALUE: | £1.90bn | |
| TOUCH: | 868.5-869p | 12-MONTH HIGH: | 902p | LOW: 607p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 480p* | NET DEBT: | 137% | |
| 24 weeks to13 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 566 | 82.6 | 33.8 | 7.15 |
| 2013 | 595 | 65.6 | 31.6 | 7.60 |
| % change | +5 | -21 | -7 | +6 |
Ex-div: 18 Dec Payment: 24 Jan *Includes intangible assets of £722m, or 331p a share | ||||
