Numis downgrades Greene King from 'buy' to 'add'

10th Sep 2014 09:39

Numis Securities has cut its rating for pub group and brewer Greene King from 'buy' to 'add' after the company's first-quarter trading update on Wednesday."Greene King’s strategy is to grow its managed estate (c.73% of group profit), reduce its reliance on tenanted pubs (c.17% of group profit) and at least maintain brewing profitability," Numis said."Although the managed pubs were arguably outperformed by the tenanted and brewing divisions in Q1, this is rare event and the strategy is right for the long-term, in our view."However, the broker has cut its profit forecasts by around 3% to reflect the timing of new openings and lower margin assumptions.Greene King added a net five additional sites during the quarter, but said that adding another 63 (to make the full-year target of 68) would now be achieved in July 2015 rather than April 2015.Numis now expects pre-tax profit for the fiscal year to April 2015 to total £174.7m (previous estimate: £180.3m), up from £173.1m the year before but below the current consensus forecast of £179.4m.The broker said that the 12 months to April 2015 is likely to be a period of "limited growth" due to the disposal of Hawthorn Leisure and a tough comparative last year, which was a 53-week year.Greene King's shares were down 3.5% at 802.5p by 09:56, compared with Numis' 975p target price.