Pubco share slide continues
Shares in leading UK pubcos slid further yesterday as investors continued to digest a raft of potentially bad news for the sector.
Companies such as Greene King, Marston's, JD Wetherspoon, Punch Taverns and Enterprise Inns saw sharp falls in the price of their shares as the City took on board fears over government plans for alcohol consumption, wavering consumer confidence, the impact of the forthcoming English smoking ban and the fading prospects of any UK pubco ever becoming a real estate investment trust (REIT).
Analysts noted that the government's £10m review into alcohol prices and promotions was playing a part in knocking overall sentiment on the drinks sector, although most conceded that with the authorities more likely to clamp down on supermarkets and corner shops, pubs would ride out this particular storm.
"They've had a go at smoking and now it's alcohol's turn," said one analyst. "But at worst this will probably be neutral for the pubcos, and could even be marginally beneficial."
The lack of movement on REITs - an investment vehicle described by one analyst as having now been "well and truly kicked into touch" as far as pubcos were concerned - was also a factor in tipping over the value of stocks.
James Ainley of JP Morgan said there was now "growing scepticism" concerning the likelihood of pubcos becoming such vehicles.
"That [leisure group] Vector has struggled to get away what would be the UK's first hotel REIT is indicative of the concerns in this area," he said.
"It certainly raises questions about the value for pubcos in doing this. Look at what Mitchells & Butlers (M&B) and Enterprise Inns are doing and it's not about aiming to become a pure REIT."
Meanwhile, one analyst who did not want to be named said some companies were needlessly fuelling the 'consumer confidence' argument. "M&B's poor performance in restaurants has spooked the sector," he said.
"Given the upbeat trading for the likes of Marston's and Young's in recent months it's rather disingenuous of M&B to blame lower-spending consumers for their own trading woes, when in fact their eye hasn't been wholly on the ball, focused as it has been recently on its Whitbread pub conversions."
