Investment Column: This company looks Punch drunk, so sell

N Brown; Air Partner


Our view: Sell

Share price: 96.65p (-19.25)

You know it's time to start worrying about a company when its management resorts to bombastic statements about how their wonderful product is a cultural icon in good old Blighty. So here's Punch Taverns: "We believe the pub is still one of the most important cultural components of social life in Britain. At Punch, we are committed to safeguarding the future of the great British pub."

Presumably, this is designed to detract attention from what are basically rotten results. The punch drunk chain is reeling under a debt mountain of nearly £4bn, has written down the value of its estate by £663m, and tripled annual losses to £173m. If you strip out the non-cash items in the numbers, you find that the company is still making money, more or less. To be accurate, 39 per cent less, at £160m.

What's worse is that sales figures across a string of business lines show nasty negatives. Measures are being taken to address the problems – underperforming pubs are being put into a recovery unit, or sold, which is raising much-needed cash to pay down that debt.

But the outlook, the company said, is "challenging" and "lacks visibility". That's what other pub companies have been saying too, but their results have not looked as bad as this. Some of them have even shown signs of encouragement, particularly the smaller ones.

Punch only trades on 6.4 times 2010 full-year earnings, which is hardly expensive. But given the business's problems, it's hard to say that it deserves a better rating. Even if its turnaround measures start to bear fruit, the question is whether an enormous, impersonal chain can ever really effectively run an "important cultural component of social life in Britain". The Campaign for Real Ale appears to think not and nerves are jangling about its super complaint over tied beer prices that the Office of Fair Trading will soon rule on.

There have been suggestions that shareholders would be better off with a break-up. We agree. Time gentlemen, please. Sell.

N Brown

Our view: Buy

Share price: 257.6p (+3.6p)

Caution has been the watchword for the online and catalogue clothing retailer N Brown over the last 12 months.

The company, which caters for what it describes as the "older and larger customer", has scaled back advertising and looked at ways of getting its debt pile down. Judging by yesterday's interim results, the strategy appears to have worked.

The group says first-half profits were up 13 per cent, while full-year targets are on track to be met. So far so good, and the investment case is that much stronger when the fact that the group trades at a huge discount to the rest of retail sector is considered (it is on 11.2 times 2010 forecast earnings).

Investec says the stock is a buy, arguing that the discount is unjustified: "We think the price-earnings discount to the sector – around 23 per cent for 2010 – is unwarranted for a company that can grow the top and bottom lines in both good and less good economic times."

Alan White, N Brown's chief executive, also argues the shares are too cheap (as company bosses are prone to), but concedes that the market factors worries about bad debts into the stock price. He also admits that while he is a little more confident than during the heat of the banking crisis, rising unemployment could weigh on a recovery.

Nonetheless, we rather like N Brown and back its planned move into the US market, where it hopes to operate from the end of next year, and where it says the "demographics fit our size profile". We also like the group's caution over the last 12 months and think the dividend yield of four per cent is enough to keep punters interested in the meantime. Buy.

Air Partner

Our view: Hold

Share price: 570p (-27.5p)

Air Partner, the private jet chartering group, has had a horrible recession – full-year profits crash landed, dropping by 90 per cent to just £0.9m the company said yesterday.

In August last year, chief executive David Savile maintained that he was pleased with progress and said that even with the looming financial crisis, he was confident the company would be able to increase its proportion of safer non-corporate clients. More than a year on, the proportion of public sector clients has not increased. Mr Savile now claims Air Partner is in a much better position than most of its competitors.

Maybe, but the stock has nosedived from 885p when we last looked. Moreover, even according to analysts at house broker Oriel, it is looking expensive, trading on a forward price-earnings ratio of 27 times.

That said, we would hold on to the shares. After maintaining the dividend – paying it largely out of strong cash reserves – Air Partner yields an impressive 5.7 per cent, which is well worth having until earnings and the shares turnaround. Hold.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
News
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
people
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
tv
News
i100
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
News
i100
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.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot