Opportunity knocks for hosts
The last couple of weeks have seen a major upwards surge in the value of the major tenanted pub companies' shares. Punch Taverns, for example, has more than trebled in value, while Enterprise Inns has enjoyed only slightly smaller gains.
These share-price movements tell us that investors think it's much more likely that the major pub companies can survive the current recession. Sentiment has been helped by several major companies, such as Britvic this week, enjoying success in persuading banks to re-finance them.
Much like the way the major tenanted pub company shares rose to improbably dizzy heights during the boom years, recent lows have looked pretty ridiculous to anyone who believes that the tenanted pubco model is flexible enough to cope with the current stresses. The recent gains amount to a re-assertion of a more balanced view by investors of the prospects for the major pub companies.
Nevertheless, these are peculiar times, with things happening out there within the tenanted estates nobody would have dared forecast just a couple of years ago.
Punch Taverns is in the process of selling many of its best pubs to generate spare cash. (I expect disposal figures to exceed expectations when figures are unveiled later this month.) Enterprise Inns is paying management companies to keep some of its best pubs open, and a £50 a barrel discount is a regular feature of new agreements. Scottish & Newcastle Pub Enterprises has abandoned its franchise agreements (with its charge of a 2% royalty on turnover) because, I suspect, it represents too much of a barrier to new entrants (and annoys its best licensees who feel they are punished when they out-perform). Pubfolio has introduced a short-term lease agreement that allows tenants to give notice, but not the landlord. Greene King now has a tenanted sub-division it calls the Maverick Pub Company because everything is open to discussion for
new arrivals.
What all this amounts to is a different kind of market correction. The urgent need to let (and sell) pubs is pushing enhanced opportunity in the direction of the humble tenant.
Big week for the trade
We are less than a week away from a moment of truth for the current Government. Next Wednesday, we'll discover whether the Chancellor and his cohorts are capable of listening and responding to an overwhelming argument. There is huge public and political support for a change of mind on the duty escalator that Alistair Darling unveiled last year. The escalator will heap more and more misery on the pub sector if it is adhered to. It really is time for this Government to listen and do the right thing.
