City Comment: Hamish Champ
If one wanted further proof that there is a clear blue sea between Punch Taverns and Enterprise Inns over future strategy one only need note comments made recently by the latter's Ted Tuppen.
Observing in The Times that his company regularly casts its slide rule over whatever comes onto the market pubwise, he nevertheless reckoned that prices were too high to justify Enterprise making deal-winning bids in the current environment. It struck Ted that there were better things to do with the group's money.
Like reducing its debt and ploughing ahead with its share buyback policy. Since last November's announcement that it proposed embarking on a programme buying back its own shares, Enterprise has gone to the market and acquired nearly 50m shares at a cost of £337m.
Does this rule out Enterprise taking to the acquisition warpath meaningfully in the coming months? The answer is 'probably'. Seeing the market as one where earnings-enhancing acquisitions are at a premium - quite literally - means more appropriate methods of returning value to the group's investors are the order of the day, although there are those who argue that buybacks help bolster a company's share price rather than underlying trading doing so; some analysts point to JD Wetherspoon in this regard.
Punch, on the other hand, has made little secret of wanting to buy again if the right opportunity presents itself. Despite being up to its ears in finding retailers for those Spirit pubs it wants to transfer out of managed operations, one gets the sense that it is prowling around a bunch of potential deals, such as the chunk of pubs Mitchells & Butlers believes are surplus to requirements.
Echoing sentiments I've heard elsewhere - on a rather different subject, admittedly - Punch's Giles Thorley has stated that size doesn't matter as much as quality. With the latter you can meaningfully grow trade and profitability. Enterprise's Tuppen would doubtless concur in today's environment of rising pub prices.
Still, what does matter is what both groups regard as the right methodology to reap expected dividends. On such matters the two pub giants look set to be divided, but one would suggest that in a free market this is no bad thing.
