Derek Pain: Little cheer ahead for pubs, but I'm not giving up drink
No Pain, No Gain
Saturday 24 March 2012
Budgets come and go but the tax burdens inflicted on the poor old pub remain hideously severe. And with the squeeze on consumer spending and cheap supermarket booze it is not surprising many regard the traditional local as an endangered species.
Yet since its creation, the no pain, no gain portfolio has reaped rich rewards from investing in pubs and the wider drinks industry. Constituent Burtonwood, a pubs chain, was taken over at a handsome profit and Scottish & Newcastle, the last of the so-called "big six" that once dominated breweries and pubs, fell to a Continental strike allowing the portfolio to more than double its investment. Last year's departure, the Capital Pub Co., following a bid from brewer Greene King, provided further drinking money. In addition, spirits group Allied Domecq and cider maker Merrydown surrendered to generous offers. Other hits include Six Continents, a restaurant takeover (La Tasca), as well as pub and restaurant chains Paramount and Prezzo, sold at attractive prices.
The drinks industry was once the City hotspot for corporate action as Britain's beerage consolidated. Hysteria eased once most available targets were absorbed, but then Lord Young's disastrous Beer Orders revived the bid ferment, although this time round the big brewers and upstart pub companies were the victims. A story used to circulate about a Manchester stockbroker who, in the 1950s or 1960s, purchased shares in every available brewery. He made millions of pounds from the frantic bid activity.
I suppose the portfolio arrived at the tail end of the bid excitement. Still, its early successes encouraged me not to neglect the booze business and, as I write, the portfolio's three direct participants as well as constituent Booker, with more than a passing interest in selling various drinks, have, despite the bar room gloom, performed well. Shares of cash and carry chain Booker are the star performer with ex-brewer Whitbread (budget hotels, Costa Coffee and pub/restaurants) in third spot. Spirit, a pub/restaurant group, has also done quite well, and Marston's is just in the money.
The desire to eat out has come to the rescue of many beleaguered pubs. It is the drink-led pubs that are under intense pressure and there are fears their days are numbered. My three groups have each embraced the eating out phenomenon. Marston's, a traditional brewer and pub owner, rolls out such beers as Pedigree and Brakspear and has around 2,150 outlets. It has spent heavily building around 50 pub/restaurants and plans a further 25 this year. Average cost of each establishment is £2.5m. In a trading update covering 23 weeks, the group said managed pub sales climbed 3.5 per cent and tenanted estate profits 3 per cent. Chief executive Ralph Findlay warned of spending pressures, but stockbroker Peel Hunt was sufficiently encouraged to lift its share rating to buy.
Spirit, split from Punch Taverns last summer, was also quite cheerful with a second-quarter report. The Chef & Brewer and Fayre & Square pub/restaurant chains said managed pub sales were up by 4.6 per cent and the leased estate was not doing too badly.
Whitbread recently produced trading news. I thought the reported performance reasonable, but I notice a number of City analysts have taken a more bearish view, although stockbroker Shore Capital says buy.
There is no doubt pubs and restaurants face difficult times. But for the past few years the outlook has not looked too cheerful and the industry has still managed acceptable returns. The probability is modest headway will continue. I would not like readers to think the portfolio is addicted to booze in this absurdly anti-drink age, but the industry has served it well and I can see no reason to change its alcohol-related stance.
Now to the security industry. Portfolio member G4S, the world's biggest exponent of this increasingly sophisticated art, produced disappointing profits. At the pre-tax level they fell 17 per cent to £279m – slightly more than the £50m already pencilled in for the failed bid for rival ISS. Still, the year's dividend was raised by 8 per cent to 8.53p a share. Turnover increased by 4.7 per cent and further growth is expected this year, which takes in the Olympics where G4S is the security provider, but costs are advancing rather quickly.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 2 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 4 John Travolta addresses former pilot's gay romance allegations publicly for the first time
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
iJobs Money & Business
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony