Derek Pain: Cheers. Another round of success for the new-style pubs

Is the stock market recapturing its thirst for pub shares? In the opening weeks of this year they have displayed remarkable strength, encouraged by cheerful festive trading statements.

Is the stock market recapturing its thirst for pub shares? In the opening weeks of this year they have displayed remarkable strength, encouraged by cheerful festive trading statements.

At one time, managed pub chains enjoyed heady ratings. Investors were attracted by the anticipated returns from new-style, high-volume outlets that seemed to bestow a new glamour on the rather dowdy image of most high-street boozers. But the pubcos fell out of favour even before the dot.com craze took its savage toll on old economy shares. They became yesterday's heroes, although most have rolled out the sort of returns investors expected when they paid the fancy prices demanded.

There was, as the dot.coms became dot.gones, some recovery last year. So far this year, as the market as a whole has tended to drift rather aimlessly, the pub contingent has comfortably outperformed. It is, perhaps, significant that Regent Inns, the chain that attracted some of the blame for creating the earlier investor unease, produced a fine set of interim figures last week.

Three years ago, Regent rocked the industry with a shock profits warning. It had not suffered a trading downturn; accountancy problems were responsible. The setback sent its shares, 388.5p at peak, crashing. They eventually hit 100p.

Regent was the first of the new-style pub companies to come unstuck and represented a sobering moment for investors, big and small, who had alighted on the trendy new pub industry with such enthusiasm.

Investing directly in pubs is a relatively new experience for the stock market. To a large extent, the investment opportunity was made by the Tory government's controversial Beer Orders, which forced the major brewers to dump 11,000 pubs. Then managed house chains, like Regent, flexed their muscles and suddenly investors had a whole new ball game to contemplate. During their short market life, the pubcos have attracted plenty of corporate activity and more takeover action is likely. Although the share decline would have almost certainly occurred even if Regent's accountancy systems had been in better shape, there is little doubt the group's misfortunes heralded the setback. Pub shares have a long way to go before theyrecapture their exuberance.

Regent shares are around 162p. On traditional investment measurements they are cheap. Year's profits should be around £15.5m (against £10.9m), offering a prospective multiple of 11. But the market has a long memory and is, I suspect, not yet ready to forgive Regent for its past indiscretion. Still, the company has some intriguing concepts. Its Walkabout sports bars are doing well, and expansion from 21 to 50 outlets is planned. It secured control last year of the Jongleurs comedy clubs, which it wants to increase from eight to 20. More recently Yates, with the dreaded profits warning, underlined the fickleness of the present-day drinker. But other leading chains, SFI and JD Wetherspoon, have avoided disappointment. In fact, they have hardly pulled a duff pint. Yet their shares have felt the occasional draught. With their trading records they enjoy relatively healthy ratings, though of course, their multiples are not what they were. Wetherspoon, just over 400p, has been 464p; SFI, now 240p, peaked at 278.5p.

The pub business nowadays embraces disco chains, such as Luminar and Springwood. Indeed, most nightclub groups embrace late-night bars - an area that attracts many of the managed house chains. Luminar appears to have comfortably absorbed the Northern Leisure nightclubs acquisition and, like Springwood, has joined in the new year's share advance. But one pub share out of favour is Enterprise Inns. It has, despite a fine set of figures, lost ground since the year's start. Enterprise eschews managed pubs, putting its properties in the hands of self-employed leaseholders or tenants. Income is largely from rents and discounts it negotiates with brewers and other drink suppliers. Its shares touched 472.5p around the turn of the year but have slipped to 420p.

Such a reaction seems harsh. Enterprise should produce profits of around £56m this year (against £41.1m) and is keen to increase the size of its pubs estate, currently nearly 2,600.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
Sport
football
Life and Style
Agretti is often compared to its relative, samphire, though is closer in taste to spinach
food + drink
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
The dress can be seen in different colours
i100
Sport
Wes Brown is sent-off
football
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Jemma Gent: Year End Accountant

    £250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

    Jemma Gent: Management Accountant

    £230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

    Day In a Page

    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003
    Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

    Our woman in Beijing builds a new relationship

    Britain's first female ambassador to China intends to forge strong links with growing economic power
    Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

    Courage is rare. True humility is even rarer

    Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
    Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

    Alexander McQueen's astonishing vision

    Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
    New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

    Dinner through the decades

    A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
    Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

    Philippa Perry interview

    The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
    Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

    Bill Granger's Indonesian stir-fry recipes

    Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
    Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

    Harry Kane interview

    The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
    The Last Word: For the good of the game: why on earth don’t we leave Fifa?

    Michael Calvin's Last Word

    For the good of the game: why on earth don’t we leave Fifa?
    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?