Greene King unsteady on its feet amid worries over dividend
GREENE King shares were unsteady on their feet after City analysts claimed the pub chain’s debt refinancing appears to be “destroying shareholder value” to “flatter” its finances.
The pub giant refinanced £279m of high-interest debt lingering from its muchmaligned swoop for rival Spirit by using a £350m revolving credit facility but has not disclosed the interest rate on the new credit line.
Analysts at German bank Berenberg claim that the refinancing has made its dividend look more sustainable than it actually is, by cutting the interest payments which boosted earnings: “We would have to assume it [interest rate on RCF] is less than 2.5pc for the refinancing to have created any value.”
With the “disingenuous” shake-up costing almost £50m, and the company’s cheapest secured debt costing around 4pc, Berenberg’s scribblers reckon the debt restructuring has destroyed around £25m to £30m of value. The company’s debt refinancing “appears to be destroying shareholder value in order to flatter the P&L”, it claimed. Greene King declined to comment. The “sell” note knocked its shares 33p to 535.4p, their lowest level since April.
Elsewhere, cyber security firm NCC rallied to a six-month high after swinging back to the black and announcing that former Findel chief financial officer Tim Kowalski will be in charge of the company coffers. With its pre-tax profit recovering from a £44.8m loss in 2017 to record an £11.9m gain, NCC climbed 18.8p to 220p.
Asos pulled away from an eight-month low after Goldman Sachs urged investors to snap up the fast fashion giant as momentum accelerates in its US and European businesses.
Upgrading it to “buy”, analyst Tushar Jain predicted that the opening of a second larger warehouse in the US will help drive growth and enable the company to offer next-day delivery. Asos clawed back 276p to £60.56 following last Thursday’s 10pc slump on disappointing sales growth figures.
Ad giant WPP slipped back 36p to £11.80 after US rival Omnicom warned that American ad spenders are curbing their marketing budgets. Investors took bets off bookie Paddy Power
Betfair after Investec handed it a double downgrade to “sell”, weakening it 275p to £82.25.
Imperial Brands slipped back 38.5p to £28.15 after JP Morgan warned that the European tobacco sector’s results will remain “weak”.
Global stocks rallied after Federal Reserve chairman Jerome Powell said that the US economy was on the verge of “several years” of a strong job market and on target inflation. Recovering mining and oil giants boosted the FTSE 100 to a 25.88-point gain at 7,626.33.