More pain from pub groups
Article Date: Dec 12 2002A profit warning from Regent Inns and more disappointing results – accompanied by its own profits warning – from Eldridge Pope have helped dampen a battered drinks sector today. Ben Cobley reports.
Fully listed Regent Inns (REG) reiterates complaints from other groups about price discounting on the high street, a reference to JD Wetherspoon's attempts to capture market share. The company says sales in the first 22 weeks of its financial year have grown 38 per cent on continuing operations, with margins increasing, but admits to a 3.2 per cent decline in like-for-like sales.
The statement provoked a string of broker downgrades, with Old Mutual's Greg Feehely reducing profit expectations 8 per cent and KBC Peel Hunt's Paul Hickman cutting his by 9 per cent.
These two now expect pre-tax profits of around £14.5 million for the year to June 2003, with earnings of between 10.2p and 10.6p a share. Feehely reiterated his 'long held negative stance' on the group (which runs the Walkabout and Bar Risa/Jongleurs chains) with a recommendation to 'reduce', while Hickman advises 'hold', citing an historic yield of more than 7 per cent.
Eldridge Pope (ELD), also on the main board, brought forth a 21 per cent profits downgrade from Hickman, on pre-tax profits down £400,000 to £6.4 million for the year to September. The company, recently canvassed as a Greene King bid target, announced a 1.1 per cent sales decline (with a 4 per cent fall in the second half).
The company says 'the market has become even tougher', with sales dropping a further 3 per cent since the year-end. Margins shrank from 15.8 per cent to 14 per cent.
Eldridge has arranged the £7.2 million sale and leaseback of its Dorchester head office site and has sold stakes in Thomas Hardy Packaging and Thomas Hardy Brewery for £1.5 million. Regent has been getting rid of its unbranded pub estate.
Hickman rates Eldridge a 'sell', projecting current pre-tax profits falling further to £5.5 million. James Wheatcroft of house broker Investec Securities says 'buy' on bid possibilities.
Regent fell 6 per cent to 71p on the day. Eldridge dropped 8 per cent to 143.5p.
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