2008 - A Year To Forget?
Few in the pub and brewing sectors will forget 2008. Rising beer duty, higher energy bills and an economy headed for the U-bend merely fuelled what for many licensees was already a smoking ban-led decline in trade.
And while individual pubs suffered the slings and arrows of economic woe and political ineptitude - who can forgive that pre-Budget Report? - the UK's listed pub groups were hammered by nervous investors, with the country's two largest publicly-listed pub operators - Punch Taverns and Enterprise Inns - seeing their shares collapse in spectacular fashion on the back of trading fears and levels of debt.
True, the FTSE100 index lost 31 per cent of its value - nearly £500bn - in 2008, while the broader FTSE All Share index fell by a third. But while it was not a great year for most pub stocks it wasn't all gloom and doom in the Square Mile. Regional operators such as Marston's and Greene King were viewed as somewhat safe(r) bets, even though their shares did not escape completely unscathed.
And despite losing some £300m in a hedging debacle related to its aborted property venture with shareholder Robert Tchenguiz, Mitchells & Butlers (M&B) posted decent enough full year results and saw investor confidence more or less return. JD Wetherspoon also staged a share recovery, despite some analysts arguing margins would surely be eroded in the months to come as various price promotions continued.
On the consolidation front, few industry watchers began the year thinking of 'mega-deals'. After all, available capital was becoming scarce, though few had any inkling of exactly what was to come in the financial markets later in the year.
The beginning of 2008 nevertheless witnessed a change in the financing air, the phrase 'credit crunch' soon to become part of the lexicon.
One trend to emerge in 2008 was the return of the 'pre-pack' administration deal, where a company goes into administration only to have the best bits bought out again almost immediately and often by the same management teams, leaving many suppliers high and dry.
War of words
The year began much as its predecessor had ended, namely with a war of words between Scottish & Newcastle (S&N) and Carlsberg, its partner in the Russia-based Baltic Beverage Holdings (BBH) joint venture.
Carlsberg had teamed up with Dutch brewer Heineken to launch a speculative bid for the UK brewer, its eye on the BBH 'prize'. The move prompted S&N to accuse its Danish business partner of "breaching its duty of loyalty".
But the bitterness was set aside when towards the end of January the pair finally agreed terms and Carlsberg and Heineken bought S&N for £7.6bn, with the Dutch company taking S&N's UK operation as part of the deal. Departing S&N chief executive John Dunsmore took much credit for holding out against the Danes, just as his Scottish ancestors would have done more than 10 centuries before him.
Meanwhile, in a portent of things to come, January saw consumer confidence reportedly at its lowest ebb for nearly a year, with the Association of Licensed Multiple Retailers predicting gloomy times ahead for many of its managed operator members.
The country's largest managed pub company, M&B, announced post-tax losses relating to its aborted joint venture with property tycoon and M&B shareholder Robert Tchenguiz of more than £270m. While M&B chief executive Tim Clarke's offer of resignation was declined the group's finance chief Karim Naffah fell on his sword.
In February Punch Taverns suggested a 50:50 merger with M&B, a deal which never got out of the starting gate, while Laurel Pub Company, owned by Robert Tchenguiz's R20 investment vehicle, refuted reports it was to offload part of its estate including Yates's and Slug and Lettuce, into a controlled administration.
March was Budget time, and the industry slammed the government's decision to raise duty on beer by 4p a pint. Things would get worse later in the year, but in March Jonathan Neame, chief executive of Kent brewer Shepherd Neame and head of the British Beer & Pub Association's (BBPA) Duty Panel, condemned the move as a "pathetic, idiotic and shallow political gesture".
In the same month M&B angrily rejected reports it was facing a cash crisis, while the BBPA warned more than 4,200 jobs could be lost in the on-trade in 2008 as pub closures grew.
In April, Laurel Pub Company owner Robert Tchenguiz put the company into administration and cherry-picked the best bits, buying them back under two new entities, the Bay Restaurant Group and Town & Country Pub Company. The move was not without controversy, though stoutly defended by the groups' chairman, Ian Payne.
Punch Taverns, meanwhile, reported that it was "bemused" by talk that M&B was preparing to launch a bid for its Spirit Group managed pub arm, a move that was to prove fruitless.
May saw Jeremy Blood, head of S&N Pub Enterprises, promoted to head of S&N UK - effectively Heineken UK - while in another significant management move, long-time head of Scottish brewer Belhaven Stuart Ross confirmed he was to step down at the end of the year.
Presciently, research outfit Market & Business Development forecast pub revenues would fall by three per cent in real terms in 2008, as economic conditions deteriorated. June saw Enterprise Inns boss Ted Tuppen admitting a quarter of his company's pub estate - nearly 2,000 sites - were suffering. Tuppen wanted to help lessees "trade out of trouble, or alternatively trade out of the pub with dignity".
M&B denied being pressured by shareholder Robert Tchenguiz into appointing two of the tycoon's close associates to its board, arguing the new directors would bring much skill in the area of property.
A sharp fall
Heading into the summer - what summer? - shares in leading pubcos fell sharply as the future health of the economy came under intense scrutiny. Inflation rose to 3.3 per cent, the highest level since well before Labour came to power in 1997, although few could have predicted at this point in the year that, along with interest rates, prices would start to tumble as the economy nose-dived.
In July Punch Taverns rejected talk of a rights issue to prop up its balance sheet, with chief executive Giles Thorley also dismissing speculation of growing debt pressures on the group as "nonsense". City analysts later called for Punch to cut or even defer its interim dividend to save cash.
Punch-owned Spirit Group named ex-Whitbread executive Michael Tye as its new boss. Tye was immediately thrown into a long-running and bitter row with Spirit pub managers over new terms and conditions.
July also saw accountants PricewaterhouseCoopers (PwC) raise its forecast for pub closures in the next two years to 6,000, an increase of 20 per cent on its previous estimate.
In the US, European brewer InBev confirmed it had agreed terms to take over domestic brewing giant Anheuser-Busch for £26bn, while closer to the home brewing front in August, Liverpool brewer Cains went into administration with debts of more than £30m. Its banks had refused to back a refinance plan which would have enabled it to pay an outstanding tax bill believed to be £13m.
The following month saw brothers Ajmail and Sudarghara Dusanj, former management at Cains brewery, buy back the business from administrators.
September also saw Enterprise Inns booted off the FTSE100 stock index, leaving Whitbread as the only pub-related company on the leading share index, and PwC warned the economic crisis was stopping a quarter of all pub regulars visiting their local boozer.
In October Punch Taverns' leased pub operation boss Deborah Kemp announced she was leaving the group, to be replaced by ex-Thresher chief executive Roger Whiteside.
The effects of the credit crunch and the nea
