Steady does it wins the race

The pub sector is a bit like the fable of the tortoise and the hare at the moment. The tortoises moved forward at their own pace during the boom years declining to take on huge amounts of debt to turbo-charge their progress. It made them look dull and conservative.

The hares looked so much more whizzy as their balance sheets filled up with cheap debt and they made acquisition after acquisition. They were lauded for having an "efficient balance sheet", but, as it turned out, the strategy left them at the mercy of their banks and the debt markets.

The real danger period was 2004 to 2007 because the market was reaching its absolute height.

Those companies that were buying pubs in large numbers during those heady years are likely to have paid too much.

Those companies that were sitting on their hands or even selling assets were either keeping their powder dry for a market correction, or taking advantage of peak property market prices to off-load their unwanted assets.

In some ways doing nothing is the hardest thing in the world. There is quite a lot of discipline involved in resisting joining a gold rush, especially when the consensus is that pub prices are maintainable because the days of boom and bust are over.

I remember results meeting after results meeting held by London brewer Fuller's, in which the company insisted that London pub property prices were too high.

Young's also opted for the dull and dusty route of taking a cautious approach to debt and rewarding shareholders through upping dividends each year.

McMullen's, as the Morning Advertiser reports this week on page 12, can congratulate itself on hanging back with

the tortoises.

The vast majority of family regional brewers decided to play the long game that has stood them in good stead over several generations. It's no surprise that these are the companies well placed to buy top-class pubs in the chastened climate of 2009.

There is only so much sympathy possible for sophisticated investors and their banks, who piled into the pub sector at the top of the market. The result is that a tranche of operators of bottom-end pubs in particular need to have their debts written down to allow them to go forward.

A bit more sympathy is owed to those individuals who have been wrong-footed by the market.

The most obvious example is those thousands of people who paid a fat premium to buy a leased pub on assignment. (Enterprise Inns reports that almost 50% of its current tenants came into the business through this route.) For these people, the inescapable truth is that their proverbial pint had way too much froth

on top.