OK, Probably Extending Cuts

OK, Probably Extending Cuts

Shares in Marstons are 10% to the good this morning, extending their rebound from 100p. This is thanks to statutory pre-tax profits growing three times as fast as revenues (revs +8% profits +24%) on strength from its brewing segment and higher average profits per pub. Even if underlying growth suggested the reverse (revs +10%, profits +3%), suggesting margin contraction, cost pressures are no secret and at least both revenues and profits are still growing.

The same can’t be said for Greene King, whose shares are 2.6% lower (albeit well of lows of -8.3%, retest of last week’s 5yr lows) after first half revenues fell 1.2% and adjusted pre-tax profits (excl. exceptionals) dropped a more worrying 8.0%. Decent growth in Brewing and Brands was no match for cost pressures on the key Pub division and investors clearly see risk in challenging first half trading conditions continuing, the consumer still cautious and cost pressures hanging round. And management confidence is clearly lacking with no increase in the first half dividend something it hasn’t failed to offer since 2010/11.

After Mitchells & Butler plunged 10% last week to revisit summer lows, only to recover all its lost ground and more, might Greene King be set for a similar recovery from its current hangover? And does the Marston’s bounce have kegs?

Marstons shares +9.5%; Accendo Markets does not have a rating or target price on Marstons

Greene King shares -2.6%; Accendo Markets does not have a rating or target price on Greene King

Equities are positive at the half-way stage. The FTSE has rebounded from a weak start as oil reacts to quasi-confirmation (awaiting Russia) of an OPEC production cut extension through 2018. A stronger USD on fresh tax reform hopes has helped US futures gain, in turn boosting the FTSE’s internationally exposed members by taking GBP from its 2-month highs. This and a stronger GBP vs EUR on hopes of a Brexit deal ensures the German DAX outperforms via EUR weakness. The UK FTSE is higher thanks to defensives (weaker GBP; BATS, IMB, DGE, NG), HSBC (broker upgrade), AV (raised targets), BT (continued bullish reversal) and BAE (impact of accounting change). Representing a drag are LLOY (profit taking) and healthcare giants AZN & GSK. Germany’s DAX is up sharply thanks to EUR weakness producing gains across the board, most notably for Deutsche Telekom, Continental (Citi says US tax winner), Beiersdorf and Commerzbank. The FTSE 100 has bounced back above 7400. The DAX 30 has found fresh resistance at 13180. Dow Jones Futures are testing the floor of a 100pt rising channel. Gold has pulled back to rising support around $1280.”

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