Greene King Trading Update

[idpickering]

Trading statement for the 18 weeks to 2nd September 2018

At its AGM today, Greene King will make the following trading statement for the 18 weeks to 2nd September 2018.

The positive momentum in Pub Company continued through the summer with like-for-like (LFL) sales up 2.8% for the first 18 weeks of the year, ahead of the market1 which was up 1.2%. Growth over the last 10 weeks was 3.2%. This strong performance was underpinned by the ongoing benefits from our sales driving investment to further improve our Value, Service and Quality, and boosted by the weather and a successful World Cup.

Our Greene King branded local pubs traded particularly well with LFL sales of +5.5%, driven by very strong LFL drink growth. 3.7m pints of beer were sold in total during England's seven World Cup matches and LFL sales on the day of the semi-final were up 61%.

LFL net profit in Pub Partners was -0.4% after 16 weeks, impacted by the timing of higher overhead costs which we expect to balance out over the year. Total beer volumes in Brewing & Brands were up 4.0% and own-brewed volumes were up 0.3%.

Our cost mitigation programme to help offset gross cost inflation of c.£45-50m is on track and we are making good progress with our refinancing programme, which will reduce the cost of debt and increase flexibility.

We remain on course to dispose of 100-110 pubs this year and expect to open around nine new pubs.

We continue to focus on profitably driving top line growth, developing a more streamlined and efficient organisation and further strengthening our capital structure to deliver long-term value creation for our shareholders.

https://www.investegate.co.uk/greene-ki ... 00020495A/

[maximan]

Thanks Ian a lot to like there.
I hope the pub disposals will weed out the weaker ones and help with the bottom line.

[idpickering]

Thanks Ian a lot to like there.
I hope the pub disposals will weed out the weaker ones and help with the bottom line.

You're welcome maximum. I do find it strange that they want to close 100 -110 pubs and open 9 new ones though?

Ian.

[maximan]

Hi Ian
I would like to think that they are being very cautious on opening new venues as good ones must be scarce and they are cherry picking.
If they can get rid of the under performers and add just a few good ones I would imagine it could do wonders for the bottom line.
It wold be nice if the disposals could be made with little or no Capital loss ie convertible into housing maybe.

[Arborbridge]

Thanks Ian a lot to like there.
I hope the pub disposals will weed out the weaker ones and help with the bottom line.

You're welcome maximum. I do find it strange that they want to close 100 -110 pubs and open 9 new ones though?

Ian.

I don't find it odd and see it the way Maximan does. An estate must gradually evolve over time, so let's give the benefit of any doubt. I know a Greene King pub near me which was sold off for re-development (the are including their land is now flats and a leisure centre) as the area had become out of the mainstream for entertainment and eating and there was no reason why anyone should visit. One hopes they used that capital raised some more appropriate.
Further, they did take over a job lot of new pubs which they are probably pruning back after having looked at the total estate. I expect some of that was already expected and costed during the take-over negotiations.

Not much different to "running your winners and cutting your losers".

Shares up 13% as I write. Some of those shorters getting out too, perhaps?

Arb

[idpickering]

Fair enough Arb. Let the managers manage. I'm sure they know what they're doing.

Ian.

[pyad]

I don't find it odd and see it the way Maximan does. An estate must gradually evolve over time, so let's give the benefit of any doubt. I know a Greene King pub near me which was sold off for re-development (the are including their land is now flats and a leisure centre) as the area had become out of the mainstream for entertainment and eating and there was no reason why anyone should visit. One hopes they used that capital raised some more appropriate.
Further, they did take over a job lot of new pubs which they are probably pruning back after having looked at the total estate. I expect some of that was already expected and costed during the take-over negotiations.

Not much different to "running your winners and cutting your losers".

Shares up 13% as I write. Some of those shorters getting out too, perhaps?

Arb

Agreed it's not odd at all, they have always done this and it is an essential process in running a pub group successfully. What would really be odd is if they didn't do it. I rate GNK as a Buy on HYP grounds and have for some time. This trading update does not change my view.

[dredd0]

'further strengthening our capital structure to deliver long-term value creation for our shareholders'

sounds a bit like a hint of a dividend cut to me.

I confess to tinkering away my GNK at 507p in February on fears about the sustainability of the divi. They are faced with a multiple squeeze between the increasing National Living Wage, reduced migrant labour, subdued casual dining demand, and their high gearing.

This little bit of good news is noise, I fear.

[Gostevie]

'further strengthening our capital structure to deliver long-term value creation for our shareholders'

sounds a bit like a hint of a dividend cut to me.

Maybe, but at least we have a nice chunky final dividend to look forward to exactly a week from today.

As an aside, I like the way that Greene King's financial calendar gives the dates of all significant events as far ahead as the 2019/20 interims on 28th November 2019:

https://www.greeneking.co.uk/investor-c ... -calendar/

For me it's a sign of an well organised company that takes investor relations seriously.

Happy to keep holding.

Gostevie

[tjh290633]

It would appear that GNK's announcement has done Marston's share price a power of good.

TJH

[Arborbridge]

It would appear that GNK's announcement has done Marston's share price a power of good.

TJH

Yes, up 5% or so: there often is a resonance between shares of similar types. The two having been declining in much the same way over the past few years, which tells us that this is a general sector malaise rather than something company specific. Consumers short of cash,minimum wage, perhaps fears of the B word and declining currency affecting ingredients.

Arb.

[Raptor]

It seems like my punt on GNK last week was a good choice, a rare occurance in the last few years. Long may it continue. I also noticed Marstons being dragged up on the announcement so a double for me.

Raptor

BTW seems I missed the vouchers this year.... note to myself to let broker know next year

[idpickering]

It seems like my punt on GNK last week was a good choice, a rare occurance in the last few years. Long may it continue. I also noticed Marstons being dragged up on the announcement so a double for me.

Raptor

BTW seems I missed the vouchers this year.... note to myself to let broker know next year

Yes, a nice 5% rise in the Marstons' share price on Friday, which is welcome, but not that important to us HYPers. It is my intention to top up my MARS holdings soon, maybe even this month.

Ian.

[Itsallaguess]

It would appear that GNK's announcement has done Marston's share price a power of good.

Yes, up 5% or so: there often is a resonance between shares of similar types.

Which neatly reminds us of the importance of sector-diversification.

Quite often the sector-related price movements like this aren't in a positive direction....

Cheers,

Itsallaguess

[pyad]

Yes, a nice 5% rise in the Marstons' share price on Friday, which is welcome, but not that important to us HYPers. It is my intention to top up my MARS holdings soon, maybe even this month.

Ian.

Yup, it's an HYP Buy in my opinion. Their pubs are MARS Bars.

[idpickering]

Yup, it's an HYP Buy in my opinion. Their pubs are MARS Bars.

Thanks for that Stephen. My account is now set up to buy more Marstons.

Ian.

[Gengulphus]

Ah, so that's what that company name is about - owning lots of MARS bars: tons of them, in fact! ;-)

Gengulphus

[tjh290633]

Ah, so that's what that company name is about - owning lots of MARS bars: tons of them, in fact! ;-)

Gengulphus

And I always thought it was down to their Pedigree. You could almost Banks on that.

TJH

[Itsallaguess]

And I always thought it was down to their Pedigree. You could almost Banks on that...

But do you need Courage to invest in them?

They've got a Forecast Yield of 8% according to Digital Look, Wychwood perhaps indicate a too-good-to-be-true proposition....

Cheers,

Itsallaguess

[tjh290633]

I did own Courage when they were part of Hanson and then Imperial Tobacco.

I try not to make an Abbott of it, however.

TJH