The Investment column: Regent Inns can do no wrong as profits rise 71 per cent
Tuesday 18 February 1997
Half-year results yesterday showed the good times continuing to roll. Pre-tax profits of pounds 5.99m were 71 per cent higher than a year ago, struck from sales of pounds 20.6m, a 43 per cent increase. Earnings per share of 6.32p were 67 per cent higher and the dividend rose almost as fast, up 59 per cent to 1.0p.
Behind those figures lay a healthy growth in like-for-like sales of 11 per cent, so the company is not simply buying growth but creating it from within. On top of that, expansion is accelerating with nine openings in the first six months likely to be joined by another 11 in the second half. That will take the group to 100 outlets and the target for four years from now is 200.
Trading since the end of the first half has continued strongly and like- for-like sales are once again 10 per cent better. Plainly this is not sustainable indefinitely, but Regent is still firing on all cylinders. Margins are still rising, gearing is a manageable 47 per cent and, more important, interest and dividend cover is very comfortable.
What is striking about Regent's success is that it doesn't appear to reflect any great imaginative leap or stunning new invention. The company simply runs pubs, opening new ones at a steady rate in good high street locations, often converting old banks or post offices. The difference would seem to be just that it does it better than anyone else.
As free houses, Regent's pubs offer a good selection of popular beers. As crosses between traditional pubs and wine bars, women like them. People like the fact that, unlike arch-rival JD Wetherspoon, Regent's pubs are not obviously part of a chain. It is a formula that works.
That's important for investors, because one of the common features of the handful of truly great growth stocks the market throws up each year is the ability to clone a formula and quickly roll it out nationally. Regent is starting a concerted push into the Midlands and North from its London heartland, so if the formula travels the extraordinary growth of the past few years could continue.
The trouble with high-growth shares such as Regent is that they always look too expensive so potential investors are put off by a sky-high rating, only to regret it within weeks. Two months ago Regent was 300p and looking pricy; now it is 20 per cent higher.
On the basis of house broker Kleinwort Benson's forecast of pounds 11.7m profit this year and pounds 15.5m next time, the shares stand on a prospective price/earnings ratio of 30, falling to 23. Investing at this level requires a leap of faith in Regent's ability to maintain momentum, but existing shareholders should hold on.
- 1 If I were Prime Minister: I'd give tax cuts to the rich, keep Trident, and get my football team wrong
- 2 Italian police 'reveal' what Jesus looked like as a young boy
- 3 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 4 University student in court for allegedly covering housemates' food in window cleaner and spit
- 5 Ryan Gosling posts tribute to 'Ryan Gosling Won't Eat His Cereal' creator Ryan McHenry
Italian police 'reveal' what Jesus looked like as a young boy
Who should I vote for? The Independent quiz matches best political party for undecided voters ahead of the general election
Mysterious 'X-Files' sounds heard miles above the Earth
Garland shooting: Isis claims attack on Prophet Mohamed cartoon contest in Texas as its first action on US soil
Met Gala 2015: Beyoncé manages to out-skimp Rihanna, Miley and Kim Kardashian combined with near-naked ensemble
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...