Greene King: Footfall up on football, but costs rising too

Greene King management may well be toasting the recent good weather and England’s World Cup success, with Pub Company Sales up a sparking 2.2% like-for-like in the last 8 weeks, but the future is perhaps not so bubbly for them or investors. Or drinkers for that matter. And not just because of that global shortage of CO2.

Greene King: Footfall up on football, but costs rising too

Greene King management may well be toasting the recent good weather and England’s World Cup success, with Pub Company Sales up a sparking 2.2% like-for-like in the last 8 weeks, but the future is perhaps not so bubbly for them or investors. Or drinkers for that matter. And not just because of that global shortage of CO2.

That +2.2% is much improved on the -1.7% like-for-like growth reported for the segment for 2017/18 (-1.2% when snow impact excluded). And the second half of last year was better than the first, even after that snow. But full year adjusted profits still fell a whopping 11.2% dented by exceptionals and the final dividend has been kept flat. Hardly a confidence booster for investors.

More importantly the latest guidance hints at £45-50m more cost inflation in 2018/18, keeping margins under pressure. And with management only targeting cost savings of £30-35m this won’t be enough to overcome said inflation, unlike last year. Not good for margins.

The result is that even hopes of like-for like growth in its Pubs segment in 2018/19 – as opposed to last year’s contraction – is falling on deaf ears and the shares are back sharply from near 9-month highs, retracing a hefty chunk of their recent 42% bounce from April lows.

Where the shares go from here could be dependent on how far England makes it on the journey to Moscow.

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