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Shares in Marstons are 10% to the good this morning, extending their rebound from 100p. This is thanks to statutory pre-tax profits growing three times as fast as revenues (revs +8% profits +24%) on strength from its brewing segment and higher average profits per pub. Even if underlying growth suggested the reverse (revs +10%, profits +3%), suggesting margin contraction, cost pressures are no secret and at least both revenues and profits are still growing.
The same can’t be said for Greene King, whose shares are 2.6% lower (albeit well of lows of -8.3%, retest of last week’s 5yr lows) after first half revenues fell 1.2% and adjusted pre-tax profits (excl. exceptionals) dropped a more worrying 8.0%. Decent growth in Brewing and Brands was no match for cost pressures on the key Pub division and investors clearly see risk in challenging first half trading conditions continuing, the consumer still cautious and cost pressures hanging round. And management confidence is clearly lacking with no increase in the first half dividend something it hasn’t failed to offer since 2010/11.
After Mitchells & Butler plunged 10% last week to revisit summer lows, only to recover all its lost ground and more, might Greene King be set for a similar recovery from its current hangover? And does Marstons’ bounce have kegs?
Mike van Dulken, Head of Research, 30 Nov 2017
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