A cold and slow start to the week with some snow in the mix too, but then it is the middle of winter. Well today amongst other things we have had an interim management statement from the brewing and pub chain Greene King (GNK). This seems OK in a dull kind of way with retail like for likes (LFL) up by 2% over the Christmas period and by 0.6% in the year to date. The LFL's have been flat over the last 6 weeks but they did allude to tough comparatives from last year. They also referenced their own Leisure spending tracker which suggested a fall in this type of spending in November and an effect from tougher drink driving regulations that were introduced last Christmas in Scotland.
Meanwhile if anything their pub partners and own brewed bear seemed to have performed slightly better in growth terms.
They also touched on their proposed acquisition of Spirit Pub Company (SPRT) which is progressing having been approved by shareholders and which they hope to complete in the first half of this year. They also said that:
"this will create the UK's leading managed pub company and deliver significant shareholder value through material synergy generation and anticipated earnings accretion.
Summary & Conclusion
Overall it seems like a steady as she goes type of update from Greene King. However, with some hopes of an improvement in consumer spending after the fall in the oil price, inflation and some earnings growth the outlook for them could improve from here and they should have the benefits of the Spirit acquisition to add on in the second half. Therefore it may be a bit dull for now but with some hopes of an improvement as the year progresses.
In terms of the valuation they look pretty average with a Compound Income Score of 50 although within that the value is a bit better than average with a yield of 4% and an EBIT / enterprise value yield of 6.8%. On top of that they are forecast to grow their dividend by around 7% this year which in line with the longer term dividend growth that they have tended to achieve. Otherwise the P/E and yield seem to be towards the lower end of their range from the last couple of years although this (de-rating) has probably been driven by some steady down grades to earnings since last April.
Technically therefore the shares have been in a downtrend since then but have shown some signs of recovery since the end of last year as maybe some of the technical selling surrounding the Spirit deal has abated. However, I note there are still short positions outstanding of just over 8%, but I suspect most of this will relate to arbitrage trades on the deal. With the shares now above their 50 day moving average and having closed a gap on the chart just above 780 pence they look a little over bought short term and a falling 200 day is not too far away at around 810 pence.
Thus I suspect they may pause for breathe or a pint around here as the shares try to build a base in the months ahead, before better times and benefits from the Spirit deal in the second half which could brew up a more frothy share price. As I can hear the tumble weed and sense your silent groans - I'll get me coat (see video at the end if you don't get that reference) & if you do too. For a bit of balance here's a link to Dry January campaign.