Charity: 'Tis the season to shed dead weight

There's no doubt that the high street is currently seeing the most savage shake-out in its history.

A full decade ago a tidal wave of capital was pumped into opening large-capacity venues.

This year, Retail Price Index-linked rents, the smoking ban, reduced levels of consumer spend and higher operating costs have caught up with a fresh tranche of operators.

Just three months into 2008, there's been a record number of pub and operating companies entering administration or thinking about it: Massive Pub Company, Sports Cafe, Soho Clubs and Bars, Laurel Pub Company and Candu Entertainment.

In some cases, there's been a kind of domino effect.

In the example of Candu, which by one account has been trading from weekend to weekend, leases on sites it had sold have bounced back to compound its problems.

Some observers are gazing up the assignment hierarchy to see who else might be in the firing line.

It's interesting that the current climate has seen the emergence of a new entrant like Agilo, a specialist in re-engineering value from "special situations"​.

Agilo's founder Jason Granite has extensive experience of leading a number of key restructuring transactions as a senior member of Deutsche Bank's Distressed Products Group, the largest distressed debt trading desk in Europe.

Toxic experts​

This company reminds me of one of those experts from the Ministry of Defence who gets called in to deal with a toxic chemical spill.

Or else a top cancer surgeon who has to chop limbs off to save the patient.

Gone are the days when companies bought other companies whole to boost earnings. These companies contain too many poisons to be eaten in one lump.

To get to the viable parts of the business, in many cases a third or more of venues need to be purged by the process of administration.

It's the final act of the tragedy of over-expansion. With the wonderful clarity of hindsight, too many sites were opened by over-optimistic businesses willingly signing up for excessive rents or paying premiums that were too high.

Agilo is betting that the sites it buys out of administration from Sports Cafe and Candu will remain, by dint of their quality of market position, well above the high tide of increasing costs and declining sales.

Laurel​

It's a bet that Robert Tchenguiz took when he assembled Laurel Pub Company, reassured, no doubt, by the quantity of freehold property he could tuck away. Now 90 or so pubs within Laurel will not pay their way, and, to avoid paying £150,000 or so a week to hosts at shuttered pubs, administration is the obvious solution.

The write-downs at Laurel must be a little frightening bearing in mind Tchenguiz and his backers shelled out £560m to put this company together.

Although Laurel has undoubtedly been caught offside by the smoke ban, there are definitely question marks over the quality of his investment decisions in the managed sector.

Tchenguiz has made a considerable fortune from buying freehold property and canny investments in companies like White & Mackay.

His management team is making great advances on developing the foodier parts of Laurel, but they have been saddled with a lot of dead weight.

Some observers wonder whether Laurel, for a time, followed too religiously the dictats of consultants - there are very strong views on this out in the wider industry.

Common sense has caught up with the capital expenditure splurge of the last decade.

Companies that survive, whole or in a much-reduced form, will benefit from this rapid reduction in capacity. Some industry observers think they've already spotted the next major area of over-investment: food provision.

Again, they say, there will be winners and losers.