Derek Pain: The sun shines on pubs and Spirit rises after breaking free

No Pain, No Gain

The belated arrival of summer has offered some salvation to Britain's beleaguered brewing and pub industry. The shares have now thrown off the shackles and, along with the rest of the stock market, are enjoying the more relaxed atmosphere.

Last week I focused on Marston's, the brewer and pub owner that has been a constituent of the "no pain, no gain" portfolio for four years. Today it's the turn of Spirit Pub Co, a member for just two years.

The shares were recruited at 42p. They are, as I write, near their 78p peak, capitalising the company at more than £500m. Since the weather improved, the price has frothed up from around 60p. I suppose the general stock market buoyancy has made a contribution, but the prospect of many thirsty customers crowding into pubs and their gardens has clearly been a significant factor.

It also helped that the company arranged for City researchers to visit some of its pubs and offered some details of its ambitions. One who attended what has inevitably been described as an "analysts' pub crawl" was the experienced Douglas Jack of Numis Securities.

Mr Jack was obviously impressed. Last month he put an 85p price target on the shares and suggested the next set of pre-tax profits would emerge at £55.1m, then achieve £59m and in the following year hit £64.4m. The profits progress would, he suggested, be accompanied by improving dividend payments.

Spirit was split from the struggling Punch Taverns. The idea was to float the better pubs in the Punch estate as a separate entity, so obtaining far greater relevance for them than if they remained submerged deep in the debt hotchpotch of what was a rapidly assembled and latterly none too successful chain.

Punch is still attempting to do a deal with the groups that own its huge debts. It remains the largest chain in the land with around 5,000 mainly leased and tenanted pubs. The shares have missed the sunshine revival, limping along at around 13p.

Spirit, by contrast, has not looked back. The managed pubs have been, says Mr Jack, "transformed" since the demerger. And there are ambitious expansion plans. For example, the Fayre & Square pub/restaurants chain could be increased from the present 156 sites to 250, he adds.

Mr Jack points out that managed like-for-like sales have climbed 11.9 per cent since 2010. There is "still plenty of upside", he opines.

Accommodation is, perhaps, a weakness, possibly stemming from the Punch involvement. Spirit has 29 in-house hotels under its own Good Night Inns brand. Yet a further 97 hotel operations are run by other companies, including Premier Inn, the successful Whitbread chain.

The connection between Spirit and Whitbread (another portfolio constituent) is not confined to hotels. Whitbread's Costa Coffee is sold in Spirit outlets, with sales around £800,000 a year.

If the good weather continues, pub chains, including Spirit and Marston's, as well as Whitbread, will benefit. After last year's dismal summer, and the poor weather earlier this year, the nation's surviving pubs could be in for a rousing time.

Another constituent, Brightside, the insurer where a possible bidder lurks, has issued a downbeat trading statement that could influence the amount ultimately put on the table. The likely predator, the Gibraltar-based Markerstudy, may feel the signalled bid of 27p is top whack, so dashing hopes it could be persuaded to pay more. Markerstudy, with 9.3 per cent of Brightside, has to put up or shut up by Tuesday under the City's takeover rules. It could, of course, beg for extra time – a procedure often adopted.

In the trading update, Brightside said policy sales were up 14 per cent in the first six months. Yet although current trading is in line with expectations, it anticipates that underwriting capacity will restrict the growth of online sales, which is likely to "impact on the overall financial performance of the group in the full year". After those rather restrained comments, the shares fell and are below that 27p mark.

yourmoney@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
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

    SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

    £350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

    Chief Financial Officer

    120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

    Day In a Page

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
    Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

    'Renée Zellweger's real crime was to age'

    The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
    From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

    Disney plans live-action remakes of animated classics

    From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
    Thousands of teenagers to visit battlefields of the First World War in new Government scheme

    Pupils to visit First World War battlefields

    A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
    The 10 best smartphone accessories

    Make the most of your mobile: 10 best smartphone accessories

    Try these add-ons for everything from secret charging to making sure you never lose your keys again
    Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

    Liverpool v Real Madrid

    Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
    West Indies tour of India: Hurricane set to sweep Windies into the shadows

    Hurricane set to sweep Windies into the shadows

    Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?