Regent plans to head up north

The Investment Column

Pub retailers have gained handsomely in recent years as the big brewers lost their monopoly on licences and prime sites became readily available as banks, post offices and booking halls were closed and converted into boozers. Regent Inns, which operates 60 pubs, has gained more than most.

Since floating at the equivalent of 27p in 1993, the shares have raced ahead, peaking at almost 250p earlier this year. News of an 81 per cent rise in pre-tax profits to pounds 8.0m in the year to 6 July on turnover 44 per cent higher at pounds 31.8m initially gave the shares another fillip yesterday before they succumbed to profit-taking.

A total of 13 pubs were opened during the year, with underlying sales 11 per cent higher than 1995, which was itself a vintage one for pub operators.

The secret of Regent's success is a flexible formula that largely eschews branded pubs in favour of a cross between a wine bar and standard pub.

Regent has also benefited from the relative strength of the capital's economy. Now the plan is to head up north, where David Franks, Regent's managing director, believes the pub scene is woefully underinvested.

A vehicle for such expansion is last month's pounds 6.3m acquisition of Crossgate Leisure, which brought with it 11 snooker halls and seven cafe bars. Organic growth also continues apace, bolstered by a strong balance sheet and gearing of around 30 per cent.

Regent is on target for more than 100 outlets by the year end. Mr Franks might balk at running a business twice that size, but he may not have to if Regent were bought by an acquisitive brewer like Whitbread or Bass.

Brokers are upgrading their pre-tax forecasts by pounds 1m to about pounds 12m, implying a p/e ratio of 20 with the shares down 2p at 234.5p. The fancy rating is on a par with the much larger JD Wetherspoon, but fairly reflects growth this year of well over 30 per cent. Hold.