Does Greene King plc offer growth potential after today’s investor update?

Could Greene King plc (LON:GNK) (GNK.L) deliver improving share price performance?

Greene King plc
Greene King plc

Pub company Greene King plc (LON:GNK) (GNK.L) has released a Christmas trading update today. It has pushed its share price 3% higher, with the company recording like-for-like (LFL) sales growth of 10.9% in the last two weeks.

That’s a strong performance which is ahead of the wider market. It has helped to push Pub Company LFL sales up by 3.2% in the first 36 weeks of the financial year. All sales categories saw sales growth over the last six weeks, with its Greene King branded Local Pubs driving strong drink sales growth.

The company’s Pub Partners LFL net profit was down by 1%, with total beer volumes in Brewing & Brands being up 1.8%. Own-brewed volumes fell by 2.3%.

Greene King continues to focus on improving its efficiency. Its cost mitigation programme is due to limit net cost inflation to between £10 million and £20 million in the current year. It is also making progress on its estate optimisation programme, while being on track to dispose of between 100 and 110 pubs in the current year. It also intends to open around nine new pubs this year.

The company remains confident about its outlook for the current year. It notes the risks posed by Brexit in today’s update, and its potential impact on consumer spending. It continues to seek to build a more efficient business which has a more flexible capital structure.

In my view, the prospects for Greene King continue to be relatively uncertain. The UK’s near-term economic outlook is relatively challenging, and this could be exacerbated by the Brexit process.

Although the company seems to be making progress on implementing its revised strategy, I believe that there may be more opportune buying opportunities ahead for the stock over future months. Therefore, I’m not particularly bullish about its prospects over the short run.

About Robert Stephens 5430 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page