Greene King hit by JPMorgan downgrade
Greene King slumped on Friday after JPMorgan Cazenove downgraded the stock to 'neutral' from 'overweight' and cut the price target to 750p from 810p as it pointed to the absence of a compelling catalyst to cause a bounce-back.
FTSE 250
21,240.56
17:09 27/09/24
FTSE 350
4,599.36
17:10 27/09/24
FTSE All-Share
4,555.44
17:04 27/09/24
Greene King
849.20p
17:15 30/10/19
Travel & Leisure
8,163.16
17:04 27/09/24
The bank noted that cost headwinds in the pub sector - arising from the national living wage, the apprenticeship levy, business rates and higher costs of imported food and drink - are significant, adding that while it was integrating its acquisition of Spirit, Greene King had the chance to offset some of these pressures through the delivery of synergies. "The integration is now complete, but the cost pressures remain."
"With the risk that UK consumer spending will deteriorate in the months and years ahead, it is difficult to see a positive catalyst on the horizon," JPM said, highlighting the fact the shares have underperformed in recent months as cost pressures have intensified.
JPM said that with the Spirit integration now complete, the pub operator needs to work hard on other strategies to try to mitigate as much cost inflation as it can.
"This is no easy task," it said, noting that Greene King has guided to net inflation (post-mitigation) of £15-20m in FY18.
The bank cut its adjusted operating profit estimates by 3% to £407m in FY18 and 2% to £418m in FY19 to reflect a more cautious view on the impact of inflationary cost pressures.
At 0850 BST, the shares were down 5.5% to 650.50p.