Stock Market Week: Pub chains' rise ends in hangover

A DEEPLY depressed stock market can at least enjoy a little leisure activity this week. Bowling, dancing and drinking are among the trading influences with JD Wetherspoon and Regent Inns leading the profits parade.

Unfortunately the two pub chains are unlikely to cover themselves in glory. After spectacular progress they are suffering something of a hangover and their shares, particularly Regent, are, like so many others in these downbeat days, as flat as yesterday's pint.

Wetherspoon's results will reflect a spectacular World Cup own-goal. The chain, leader of the independent pub movement which evolved after the Government's controversial Beer Orders forced the big brewers to dump 11,000 pubs, does not allow TV screens in its outlets.

Many drinkers applaud such an approach. But it seems that during the footballing extravaganza Wetherspoon's TV ban backfired as drinkers went to pubs with screens, and profits suffered.

At one time the stock market was looking for profits around pounds 23m. But the own-goal has prompted a series of downgrades and a figure near to pounds 21m is now expected. Last year Wetherspoon's managed pounds 17.6m.

The market is also fretting that the pub bonanza, which had offered glamour share ratings to the leading players, is running out of steam.

The cost of opening trendy, strategically sited outlets has soared and although some new-style pubs are still doing well there are distinct signs that industry growth is slowing. The worsening economic climate, with consumer spending under increasing pressure, is another bearish influence.

Wetherspoon's shares are not far from their year's low, ending last week at 177.5p. They were above 340p in April.

Regent is altogether a much sadder case. In June it devastated its followers - and provided a nasty jolt for the other high-flying pub chains - when it rolled out a profits warning. The shares went into free fall. From a 388.5p peak shortly before the announcement they plunged, getting to 135p before vague takeover hopes helped sentiment - rival SFI has built a 3 per cent stake.

At one time there were suggestions the chain would achieve profits near to pounds 16m. Now the chastened group is expected to roll out pounds 13m, although some analysts are even more pessimistic with Henry Cooke Lumsden on pounds 11.5m. Last year it made pounds 12.6m.

European Leisure, the sports bars and discotheques group once a candidate for the corporate graveyard, is likely to record lower profits, largely because of the sale of its Maygay gaming business business. About pounds 5m is the market estimate, against pounds 6.8m.

Allied Leisure, the bowling alley group which has hitched a lift on the Burger King fast food bandwagon, is another which has recovered from a disastrous spell. It should be in line for profits around pounds 4.3m, against pounds 2.3m.

Last week Allied increased its Burger King involvement, paying pounds 2.35m for seven outlets. It now has 34. More than 45 per cent of turnover now comes from fast food and the percentage will almost certainly increase as the company plans another 25 restaurants in the next five years.

Thomson Travel, the holidays group which came to market in a highly popular springtime flotation, checks in with maiden interims; about pounds 5m is expected. The shares have fallen from their issue price and particular attention will be paid to the group's trading update. Jason Holden, at the investment house BT.AlexBrown, is looking for year's figures of pounds 124.2m.

Capital Corporation, the casino company, and Hanover International, the hotel chain, are among other leisure companies reporting, offering interim figures.

Big guns on this week's profits schedule include British Aerospace, Kingfisher, Next, RMC and Blue Circle Industries.

BAe, with interim figures, could fly in with pounds 330m against pounds 260m. The group's cash flow could be influenced by the low oil price but it is not so sensitive as other engineers to the economic turmoil. It also has the comfort of British Airways' decision to alight upon Airbus Industrie, where BAe has a 20 per cent involvement, for much of its fleet renewal.

BCI's interim results should emerge at pounds 130m against pounds 142.6m, and RMC is likely to offer little-changed half-time figures of pounds 115m.

Next, the fashion chain, will display the well signalled scars of buying mistakes. Profits for the half year could be 27 per cent lower at pounds 49m, ending an impressive record of progress under chief executive David Jones.

John Richards at BT.AlexBrown, says: "Deflation, the weather, uninspiring 'play safe' merchandising decisions in the context of an overcrowded retail market spells trouble. Any mistake is punished severely and the Next half year results are likely to illustrate this vividly." At 426p the shares have nearly halved.

Kingfisher, however, is on something of a roll and is likely to shrug off the high street recession which has trapped so many retailers. Interim figures near to pounds 175m against pounds 150.1m are expected.

Wm Morrison, the supermarket chain, is thought to be set for half-year figures of around pounds 68m (pounds 61.7m) and Britannic Assurance should manage six-month operating profits a shade higher at pounds 72m.

The builders' profits season continues with Redrow (pounds 48m against pounds 36.1m) and Wainhomes (pounds 11.7m compared with pounds 6.7m) offering year's results. Bovis is due to check in with interim figures, say, pounds 16m, a pounds 2m increase.