Greene King Share News (GNK)

(ShareCast News) - First half profits at Greene King bubbled higher thanks to tasty organic growth and the first seven weeks from the acquired Spirit pubs business, but the brewer served up a side order of caution about rising consumer and cost pressures.As well as noting the "demand challenges" of higher consumer expectations and wider worries about consumer spending, the FTSE 250 group also highlighted Brexit uncertainty and the pressure on the hospitality from potential restrictions on immigration, the minimum wage, Apprenticeship Levy and recent proposals for increases in business rates.Although these factors were already known and the company said it was being proactive in dealing with these external headwinds and believed pubs can maintain their market share of eating out and drinking out, with Greene King "well positioned to outperform", the shares fell on Wednesday.Slowing managed pub like-for-like growth in the second quarter and falling managed margins were cited as a concern by some analysts, although an improvement has been identified in recent weeks.This conspired to mean investors largely overlooked the fact that revenue for the 24 weeks to 16 October topped £1bn, up 14% on last year's, while adjusted profit before tax rose almost 15% to £139m, with statutory profits up 9%.Adjusted earnings per share edged up 4.3% to 36p, with strong free cashflow enabling the dividend to be lifted 4% to 8.8p and covering scheduled debt repayments.Synergies from the Spirit acquisition are expected to be £30m this year, with original three year target of £2m expected in two years now.So far 50 brand conversions have been completed, with an average sales uplift of over 30%.The tenanted business outperformed, growing LFL net income by 4.2%, the fastest increase for several years and reflecting increased 'premiumisation'."We have delivered market outperformance and strong integration momentum against a backdrop of continued challenging market conditions," said chief executive Rooney Anand, who also revealed that trading has improved in the second half."Our performance has been driven by growth in all divisions and the synergy benefits from the integration. These have helped to offset increased cost pressures, particularly from the National Living Wage, as well as additional investment in the customer offer to meet higher guest expectations of value, service and quality."On the other external concerns, he added that while the consumer environment is likely to become more challenging. "we are confident that the strength of our brands, pubs, people and cash generation leaves us well placed to deliver another year of progress, value creation and returns for our shareholders".Broker Numis said it did not expect any change to consensus forecasts for the current financial year but that cost pressures suggested modest downside for 2018."GNK's share price has underperformed the market by 14% over the last 3m in response to difficult trading and concerns on the cost outlook. GNK now has the largest managed pub estate in the UK, clearly making it vulnerable to the twin impact of wage inflation and higher business rates," analyst Tim Barrett said, but adding that the Spirit upside and stock underperformance meant the stock was trading on an undemanding price/earnings ratio.