Greene King and Stagecoach

“Markets are struggling to find direction on Thursday with the FTSE 100 down 0.2% to 7,607. In mainland Europe, markets in Paris and Frankfurt manage to nudge ahead but Madrid and Amsterdam ease back,” says Russ Mould, Investment Director at AJ Bell.

Greene King

“The idea of one of Britain’s biggest pub companies going ex-growth may seem unlikely, yet that’s exactly what’s happened to Greene King. Revenue down 1.8% in the year to 29 April and no dividend growth for the first time in ages would suggest the business needs to take a long hard look at its proposition.

“To put that in some context, Fuller’s managed 5% revenue growth in roughly the same period, and Young’s enjoyed a 3.9% sales boost.

“The worst performer in Greene King’s estate is its Pub Company division which includes pubs and restaurants trading under its own brand plus Hungry Horse, Flaming Grill and Chef & Brewer, among others.

“Greene King has blamed slower food sales which is the opposite message from many other pub companies. Yes, competition is tough in the casual dining industry, but consumers are still choosing to eat out at destinations where they see good value.

“The recent sunny weather should have helped all pub companies but management at Greene King can’t rely on a few good weeks to revive earnings growth. They need to think longer term and focus on core strengths.”

Stagecoach

“Understandably commuters are often fed up with the amount they have to pay to get to and from work but today’s update from Stagecoach shows high ticket prices are not necessarily translating into bumper profits for public transport operators.

“The company takes a near-£90m hit following the renationalisation of the troubled East Coast franchise in May – which it had operated in partnership with Virgin Trains. The dividend is slashed from 11.9p to 7.7p.

“In an acknowledgement it was too aggressive in its bidding for the franchise the group is bringing in external advisors to make changes to the way it approaches future bids in UK rail. The company over paid for the franchise based on erroneous assumptions around passenger growth.

“The East Coast mainline has been a poisoned chalice, with National Express previously abandoning the franchise back in 2009.

“For Stagecoach, the East Coast exit and rebasing of its dividend at least provides a platform for a potential recovery.”

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