Eldridge Pope may be forced to consider a break up of its pub estate because of tough trading conditions.
Shares in the Dorchester-based pub operator fell sharply after the company said it expected to make a loss in the six months to the end of March and that full-year results would be below market expectations as sales continued to slow.
The announcement was the latest in a series of warnings from Eldridge Pope. In July 2002, the company said the impact of the World Cup and a drop in tourism had hit trading.
That was followed by the announcement in December of a four per cent fall in like-for-like sales in the second half of the year, when chief executive Mike Johnson said that the high street had borne the brunt of tougher trading conditions.
The latest warning said that forecasting "remains very difficult in this trading environment". The company is now assuming that its performance this year will be below market expectations.
Eldridge Pope said it was reviewing all its "strategic options," including "the process of realising value through the sale of non-core and underperforming assets".
Attention is focused on the 21-strong chain of Toad late-night bars, which has been hit by the current general downturn in town centre trading.
A sale of Toad would make the core pub estate more attractive to a buyer such as Greene King, which has run the slide rule over the company in the past.
The sticking point over any sale until now has been the high price demanded by the Pope family, which owns the majority of shares in the business.
One analyst said: "The family has been greedy, that's well known. They were looking for about £3 a share a year ago. Now they'd be lucky to be looking at an offer of £2.20."
He said the Toad chain was a "poison pill" which needed to be disposed of separately to make the core estate of around 160 pubs more attractive to a potential buyer.
"Toad is a liability. There's no doubt the estate would be more attractive without it.
"However, the problem is, in the current market, who would want to buy a chain of underperforming leased pubs like Toad?
"It's a real problem. By not selling sooner the family has painted itself into a corner."
Related articles:
Eldridge highlights tough trading times (11 December 2002)
Eldridge Pope issues profits warning (11 July 2002)