Leading analyst Anna Barnfather, at Panmure Gordon, has said Greene King is well placed to tackle inflationary headwinds.
She said a combination of continued like-for-like sales growth and integration synergies underpinned solid earnings growth and forecast EPS CAGR of at least 6% over the next three years.
She said: “Greene King has focused on growing its managed estate via new build pubs and acquisitions. Most significantly the Spirit Pub Company in 2015. We believe that the strategic focus is now on optimizing the integration and extracting the maximum synergies from procurement and sharing of best practice.
“Asset management remains key with up to 140 targeted disposals and £40-50m of annual conversion capex going into the Spirit estate with ROCE targets significantly in excess of WACC. While the brand portfolio does stretch into the highly competitive family/casual dining segment (Hungry Horse, Flaming Grill), recent performance has been resilient and should benefit from on-going investment.
“The trading update (18 weeks to Sept) reported Pub company LFL +1.7%, Pub partners +4.5% with Brewing and Brand volumes -0.5%. This was a slowdown from the early part of the period when Pubco LFL sales were running +2.8%. The company’s tone remains cautious about ‘softening economic indicators’ and risks to leisure spending and we factor in LFL sales for the full year of 1.5%.”
