Leading City analyst Geof Collyer has predicted a 13.7% rise in full-year profit before tax and amortisation (PBTA) for Greene King at its results next Thursday (30 June).
Issuing a Buy recommendation for the brewing and pub operator, Collyer, of Deutsche Bank, estimated that its sales will increase 5.4% to £1,038m, with ebita up 6.2% to £224.3m, for the results for the year to the end of April 2011. PBTA is estimated to be £139.8m, up 13.7%, while earnings per share are estimated to rise 11.8% to 48.8p.
Collyer predicted 4% fewer pubs in Greene King’s tenanted division and 2% more in the managed Retail arm.
He also predicted a “more marked difference” between its brewing arm and the other two divisions in the results, the first to report a divisional split.
Collyer pointed to five consecutive quarters of like-for-like growth in the tenanted and leased business, with Q4 at +1.6% against +0.8% for the 48 week period. Ebita in the division will be flat due to disposals, he said.
For Retail, Collyer highlighted an 8.2% rise in like-for-likes since the snow (weeks 36 to 51), with underlying like-for-likes of +3% going into the estimated results for Q1 2012.
In the brewing division, he estimates group volumes including the Belhaven business, which grew 17.5% in Q4, to be closer to +5% for the year. Overall volumes in England were up 3.9% at the 49-week stage.
Collyer also predicted a 7% increase in the dividend for the year, to 23p, “making a total growth in dividend payments of +34% since the year before shares in issue were increased by +25% as a result of the rights issue in mid CY 2009”.
He said he expects the net debt/ebitda ratio to fall “modestly” in FY 2011 and to “remain stable, despite more pub deals, going forward”.
“The lower earnings per share growth versus profit before tax growth in our table is due to a +3.8% increase in average shares, as FY’11 will be the first year that the rights issue shares will be in for a full period.”
Collyer added that Greene King’s fixed charge cover at 2.4x is “the healthiest of all the pub stocks”.
He said: “The board was confident of being able to cope with what the economy was going to throw at it in the FY’11 year-end IMS. This confidence should be underwritten by its continued operational outperformance and by the contributions from recent acquisitions.”
