Snooze outweighs booze at Vaux; The Investment Column

Sir Paul Nicholson must wonder what he has to do to satisfy the City. The patrician chairman of Vaux would never show it, but he is understandably irritated by the persistent view in the soft South that the company is nothing more than a regional brewer supplying a tired chain of tenanted pubs in a depressed area of the country. Record profits in the 12 months to September were rewarded by a 5p fall in the share price to 252.5p, a discount even to net assets.

Those results saw pre-tax profits rise 9 per cent to a best-ever pounds 34.8m (pounds 31.8m), earnings per share were also the best the group has achieved at 19.35p and the dividend, which has grown every year since 1969, edged ahead from 10.2p to 10.6p.

As with all misleading perceptions, the prevailing view of Vaux, however, has a grain of truth at its centre. The area around the company's Sunderland base has suffered enormous de-industrialisation and its 749 tenancies include a long tail of dingy boozers in areas no pub chain would choose now. The transfer of a senior manager from the 163-strong managed pub chain to tenancies is a tacit admission that the company has been slow to churn the bottom end of the estate.

As a result, profits from tenancies, still a significant contributor to the group total, fell 12 per cent to pounds 12.9m, taking the shine off a good performance from managed outlets, up 17 per cent to pounds 9m, and brewing, where returns rose 27 per cent to pounds 4.5m despite another forced widening of discounts to both tenants and free trade landlords. Brewing has benefited from cost-cutting and plainly has a future as a niche player in an increasingly consolidating market.

Beer is only half the picture at Vaux, however, a fact sometimes overlooked by investors. The snooze side of the equation is arguably much more attractive than the booze, with the Swallow Hotels chain consistently winning plaudits for the quality of its 30 mainly four-star sites. Profits in the year rose pounds 4.3m to pounds 24.1m, after occupancy levels increased from 68 to 72 per cent.

The hotel cycle should have a way to run yet and two new hotels in Liverpool and Huntingdon should keep the momentum going. Sir Paul maintains that the costs involved would not be justified by the benefits in rating terms of demerging the two sides of the group, but it is an issue that management will have to keep under consideration if the shares continue to languish.

On the basis of forecast profits of pounds 37.3m, the shares trade on a prospective price/earnings ratio of 12, and offer a yield of 5.5 per cent. Against a backcloth of such slow growth, neither ratio makes the shares look particularly attractive compared with rivals Greene King and Wolverhampton & Dudley.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
people
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
PROMOTED VIDEO
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
News
in picturesWounded and mangy husky puppy rescued from dump
Sport
David Silva, Andy Carroll, Arsene Wenger and Radamel Falcao
football
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'