Shares digital

Greene King (GNK) 725p

The brewer and pub company expects to meet full-year earnings expectations despite a downturn in the leisure sector. (Read the full story: www.sharesmagazine.com/node/3124)

Shares says: The acquisition of Loch Fyne last August proved wise as the upmarket seafood restaurant is still bringing punters. It seems the high end of the market isn’t as affected by rising fuel bills and tighter credit as they’ve plenty of cash to keep spending. Greene King’s own beer is well respected by drinkers, which explains why brewed volumes have bucked the leisure downturn trend to grow sales. Having a quality brand is paramount to surviving in negative markets. Overall pub trading is still poor, which could restrain share price growth in the short term. There is still value to be realised in the company, which has solid assets. Sit tight and ride the storm out. HOLD

The City - Landsbanki says: Greene King, like other pub companies in the past few weeks, has flagged that current trading is poor. Greene King’s managed pub division has been lagging the competition for some time and it took the bold step in splitting the division into smaller segments and appointing new management. The trading environment is certainly difficult, but we would have expected them to have worked some magic by now. Since the pub stocks began to materially underperform from July 2006, Greene King has been the best performer. We feel it is appropriate to downgrade our recommendation to a hold from a buy at this time. HOLD

The City - Altium says: More difficult trading should not surprise. Managed pub sales are broadly in line with last year, but we note (again) a more resilient performance from restaurants with like-for-like sales at Loch Fyne ahead by 2.3%. The brewing division performance does stand out, though, with own-brewed volumes ahead by 6.5% in a very difficult UK beer market. In Scotland like-for-like sales are positive in year two of the smoking ban. Group margins are also ahead year-on-year – a commendable result. Immediate outlook will remain challenging but note that comparatives will become markedly easier from the summer. HOLD