Leading sector analysts Simon French and Nick Batram look ahead to the H1 results for Greene King, the brewer and pub operator, on Tuesday 4 December.
French, of Panmure Gordon, reiterated his Hold recommendation. He said: “We forecast £82.4m PBT (28.8p EPS) up 6.7% YOY. The company reported a strong first 18 weeks to the year with LFL sales +5.1% in managed pubs and implying +3.5% in the last 10 weeks. Average EBITDA per pub in the tenanted division was up 3.5% whilst brewing volumes were marginally negative versus our forecast of broadly flat.
“Consensus forecasts are for £159.9m PBT (56.0p EPS) for FY 2013E. The stock trades on a CY 2013E adjusted EV/EBITDAR of 9.1x and yields 4.4%. This premium sector valuation accurately captures the group’s above-average returns and attractive business mix in our view. As such we reiterate our Hold recommendation and 565p target price.”
He added: “We expect LFL sales growth in managed pubs to have moderated over the rest of H1 reflecting the tougher comps, particularly in October. We expect the current trading update will highlight a robust performance in November and the group well positioned to capitalise on the Christmas trading period.”
Issuing a Buy recommendation at a target price of 660p, Betram, of Peel Hunt, said he expects a “solid H1” for Greene King.
“Trading for the first 18 weeks of the year (which encompassed the Olympics) was solid with Retail up 5.1%. EBITDA per pub in the leasehold business (16 week period) was also positive (+3.5%), although it was marginally lower in the Core estate (-0.5%). We don’t expect the picture to have materially changed over the last quarter.
“At the interim stage we are looking for an adjusted PBT of £80m vs £77.2m last time. We are slightly below consensus and although there is increasing pressure on costs we feel that the risk to our forecast is on the upside.
“The quality of the group’s track record and estate means that Greene King rightly trades at a premium to the sector. Cash flow is sufficient to support continued investment in the current estate and expansion.”
