Investment View: Follow its boss and walk away from Punch

Punch Taverns took another kicking after its chief executive, Roger Whiteside, walked out to take charge of Greggs, the bakery chain. You can see why. Punch, an advert for everything that was wrong about the debt-fuelled madness which infected corporate Britain before the credit crunch, still faces significant problems.

It's still dealing with the hangover from that, with a millstone of £2.4bn in unsustainable securitised debt hanging around its neck. Much of that was down to Giles Thorley, a predecessor of Mr Whiteside, who departed with his pockets bulging with cash and is now in private equity. Life's such fun if you're an executive.

And who can blame Mr Whiteside from wanting to have some fun himself with Greggs, which might be facing a tough consumer environment and the ever-present threat of the supermarkets, but is still expanding, making healthy profits and paying dividends. There's a lot more laughs to be had looking after that sort of operation than in spending your time negotiating with stroppy creditors.

Announcing his departure, Punch did at least say that trading was in line, which might come as a relief. The valuation metrics say the shares are cheap – trading on two times earnings for the year ending 31 August. There's a reason for that, although you could make a case for taking a speculative punt on this as a recovery play. But if so, why did Mr Whiteside leave? If Punch was a good bet, you'd think he would have stayed. I'd be inclined to follow Mr Whiteside's advice and get out of Dodge. Sell.

You couldn't find a starker contrast with Punch than Fuller, Smith & Turner. Family controlled, conservatively run, and located in the South-east, where the economy is more or less above water, there's a lot to like about the company.

The family usually has its hand on the tiller, and at the moment Michael Turner is executive chairman. Usually I'd be critical of this sort of thing, which veers away from modern governance norms. But with Fuller's I'm prepared to make a (very rare) exception, because in this case it has made for a stable and well-run business.

That shone through in the numbers. In the nine weeks to 19 January, the company reported that sales in managed pubs and hotels open at least a year rose by 4.5 per cent. That suggests things are picking up – it brought growth in like-for-like sales for the company's first 42 weeks to 2.6 per cent against the 2.1 per cent after 33 weeks. Profits in the tenanted inns division increased by 1 per cent for the 42 weeks, having been level after 33 weeks. The company bought two pubs in November (in Bath) but managed to reduce net debt.

That's a very happy scenario, and the trouble is that buying into it comes at a price. I keep suggesting that investors put some of the shares away if they show any weakness, and they dipped a bit in October, so you'll be happy now because they've put on more than 10 per cent since then.

The stock is very pricey at 18 times forecast earnings for the year ending 31 March, with a forecast yield of just 1.7 per cent. But if you have the shares you should keep hold of them because you probably won't go far wrong. On their current lofty rating, however, you'd be better off for now in spending your money in Fuller's pubs rather than buying more of its shares. You won't regret it.

After a run of upbeat trading statements from the sector, Marston's cooled things down a bit as the snow took the gloss off its latest update. Sales at pubs open at least a year for the 16-week period to 19 January were 1.2 per cent ahead of last year.

For the 15-week period to 12 January they were 2.1 per cent better. In other words, people stayed at home and turned the heating up rather than heading to their local hostelry when the bad weather struck.

With Marston's seeking to maintain margins by pushing through price increases (good luck with that in the current climate) I'm inclined to steer clear. At 10 times forecast earnings for the year to 30 September, the shares look no better than fair value.

This leaves Mitchells & Butlers, which doesn't update until next week.

I'll run the slide rule over this company in a future column.

PROMOTED VIDEO
Arts and Entertainment
Robert De Niro, Martin Scorsese and DiCaprio, at an awards show in 2010
filmsDe Niro, DiCaprio and Pitt to star
News
i100
News
In this photo illustration a school student eats a hamburger as part of his lunch which was brought from a fast food shop near his school, on October 5, 2005 in London, England. The British government has announced plans to remove junk food from school lunches. From September 2006, food that is high in fat, sugar or salt will be banned from meals and removed from vending machines in schools across England. The move comes in response to a campaign by celebrity TV chef Jamie Oliver to improve school meals.
science
Sport
England captain Wayne Rooney during training
FOOTBALLNew captain vows side will deliver against Norway for small crowd
Life and Style
Red or dead: An actor portrays Hungarian countess Elizabeth Báthory, rumoured to have bathed in blood to keep youthful
health
News
peopleJustin Bieber charged with assault and dangerous driving after crashing quad bike into a minivan
News
ebooksAn unforgettable anthology of contemporary reportage
News
peopleHis band Survivor was due to resume touring this month
News
people'It can last and it's terrifying'
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Radamel Falcao poses with his United shirt
FOOTBALLRadamel Falcao's journey from teenage debutant in Colombia to Manchester United's star signing
Life and Style
fashionAngelina Jolie's wedding dressed revealed
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

Front-Office Developer (C#, .NET, Java,Artificial Intelligence)

£30000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Front-Of...

C++ Quant Developer

£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

Java/Calypso Developer

£700 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, J2EE, J...

SQL Developer

£500 per day: Harrington Starr: SQL Developer SQL, C#, Stored Procedures, MDX...

Day In a Page

Chief inspector of GPs: ‘Most doctors don’t really know what bad practice can be like for patients’

Steve Field: ‘Most doctors don’t really know what bad practice can be like for patients’

The man charged with inspecting doctors explains why he may not be welcome in every surgery
Stolen youth: Younger blood can reverse many of the effects of ageing

Stolen youth

Younger blood can reverse many of the effects of ageing
Bob Willoughby: Hollywood's first behind the scenes photographer

Bob Willoughby: The reel deal

He was the photographer who brought documentary photojournalism to Hollywood, changing the way film stars would be portrayed for ever
Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Scorsese in the director's chair with De Niro, DiCaprio and Pitt to star
Angelina Jolie's wedding dress: made by Versace, designed by her children

Made by Versace, designed by her children

Angelina Jolie's wedding dressed revealed
Anyone for pulled chicken?

Pulling chicks

Pulled pork has gone from being a US barbecue secret to a regular on supermarket shelves. Now KFC is trying to tempt us with a chicken version
9 best steam generator irons

9 best steam generator irons

To get through your ironing as swiftly as possible, invest in one of these efficient gadgets
England v Norway: Wayne Rooney admits England must ‘put on a show’ to regain faith

Rooney admits England must ‘put on a show’ to regain faith

New captain vows side will deliver for small Wembley crowd
‘We knew he was something special:’ Radamel Falcao's journey from teenage debutant to Manchester United's star signing

‘We knew he was something special’

Radamel Falcao's journey from teenage debutant to Manchester United's star signing
'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York