Stock of the day 29/06/2015 – Greene King PLC

With its recent M&A activity completed, Greene King is preparing to release its preliminary full year 2014/15 results on Wednesday.

Greene King saw a hefty decline across 2014; from a 6 and a half year peak of £9.35 in the middle of January the company entered 2015 only 20p above the 1 and a half year lows it had hit in the middle of January, at a price of £7.36. Yet the stock has undergone somewhat of a recovery since that low at the start of the year; a rapid climb between January and March saw Greene King hit a 2015 peak of £8.91, and whilst the stock had slipped back to £8 at points, the completion of its latest acquisition saw Greene King jump to around £8.70 last week. It is currently trading at £8.50 (29/06/2015, IT-Finance.com).


(Source: IT-Finance.com 29/06/2015)

The aforementioned M&A activity was Greene King’s merger with the Spirit Pub Company, the original announcement of which back in November put the stock on track for its December 2014 nadir. The deal, worth £774 million, was finally completed on June 23rd after being given the go-ahead by the Competition and Markets Authority, which had initially feared a substantial decrease in competition in the pub sector if the deal went ahead. However, an investigation into the matter saw the CMA pleased with Greene King’s proposal, causing the stock to jump nearly 3% on the confirmation news.

The deal is just the last in a long line in takeovers by the Greene King in the last 16 years, period that has seen roughly 20 deals signed, sealed and delivered. However it is this most recent merger, one that sees Greene King’s 1900 assets (a combination of pubs, restaurants and a few hotels) joined by Spirit’s own 1200 pubs, that has made it the leading managed pub company in the UK.

The main focus of Wednesday’s announcement for investors will be any more clarity on what the post-deal consolidation process will look like. However, the company’s figures will of course be of great interest and analysts are expecting a slight dip in pre-tax profit, a 3.6% fall to £166.9 million due to weaker trading. Yet the strength of the Spirit acquisition, and the growth this promises for the future, has left Greene King with a consensus rating of ‘buy’ with an average target price of £8.72.

Monday’s stock news:

It was a tough day on the markets, which stocks finding it hard to break through the negative trading atmosphere that was sapping the life out of the global indices. Two of the biggest fallers were Tui (the German company that owns Thomson) and Thomas Cook; following the tragic events in Tunisia, alongside the issues in Greece, the travel companies dropped by 7% and 3% respectively, after both initially following by between 9% and 10% after the bell.

A reaffirmed ‘buy’ rating for Newcastle-based property company Grainger from Jefferies Group saw the company become one of the few significant winners on the FTSE this Monday as it jumped 3%. This left Grainger at a 14 month high of £2.30, just days after it was announced that activist investor Crystal Amber was to push the company’s management to up its profits.