| Britain's cash-strapped pubs groups, faced with the | | | | jacked them up to such a point where the pubs are |
| toughest trading conditions for years, look set to | | | | running on a margin which is uneconomic,' he said. |
| accelerate pub closures as the government turns the | | | | Brumby expects the rate of closures to go down |
| screws and presses ahead with planned tax rises. | | | | before the Christmas holiday season before |
| The British Beer and Pub Association (BBPA) has said | | | | accelerating again in January. |
| closures across the UK are running at 5 a day, up a | | | | 'The pubs will bend over backwards to stay open for |
| third on last year, with close to 1,900 of the country's | | | | the second half of December which is a complete |
| 57,000 pubs set to shut this year if the current rate | | | | windfall. The first week of January is going to be when |
| continues. | | | | reality dawns,' he said. |
| The industry is angry with the government for pressing | | | | Charles Stanley analyst Sam Hart believes Punch's |
| ahead with tax rises when it is facing the toughest | | | | balance sheet is overleveraged and further measures |
| trading conditions for years with pressure on | | | | in addition to the dividend suspension will be required to |
| household budgets, last year's smoking ban, cheap | | | | shore up cash. |
| alcohol offers in supermarkets, and the miserable | | | | 'Debt covenants will probably have to be renegotiated |
| summer weather encouraging drinkers to stay at | | | | and the possibility of a rights issue, debt-for-equity |
| home. | | | | swap and disposals cannot be completely ruled out,' he |
| Investor concern over the health of Britain's two | | | | said. |
| biggest pubs groups, Punch Taverns and Enterprise | | | | In recent weeks, the industry has gone on the |
| Inns, gained momentum over the summer and shares | | | | offensive. |
| in both have now lost more than half of their value | | | | Punch Chief Executive Giles Thorley called on UK |
| since the start of the year. | | | | Chancellor Alistair Darling to resign while JD |
| Shares in Punch Taverns currently trade at 3.1 times | | | | Wetherspoon founder Tim Martin demanded a five |
| forecast earnings for 2008, with Enterprise at 5.3 | | | | year moratorium on beer duty. |
| times. That compares with a price-earnings ratio for | | | | Martin reckons changes in the treatment of the |
| the FTSE All Share Travel & Leisure Index of 9.0. | | | | industry by the government are needed to avoid |
| Punch raised alarm bells earlier this month by scrapping | | | | closures and says excessive 'red tape' is playing a |
| its final dividend to ensure it could make future bond | | | | part in rising costs. |
| repayments. Punch, which has debt of £4.5 billion | | | | The BBPA has predicted up to 43,000 job losses in |
| compared with its market value of £640 million, has | | | | the pub industry over the next five years. It has called |
| repeatedly denied rumours it could breach banking | | | | for the government to abandon its plans to raise tax |
| conditions on its long-term debt, which is secured on | | | | on alcohol by 2 percent above inflation annually for the |
| most of its pubs. | | | | next five years. |
| Merrill Lynch analyst Jamie Rollo wrote in a recent | | | | A spokesman for the Department of Culture, Media, |
| research note that 20%-30% of Punch and | | | | and Sport said pub closures were a 'matter of |
| Enterprise's leased pubs were now uneconomic, with | | | | concern' but that the industry must adapt to the |
| licensees making less than the £20,000 a year | | | | changing market conditions. |
| considered necessary to make a pub worth running. | | | | The government was doing its bit by curbing red tape, |
| Mark Brumby of Blue Oar Securities was also critical | | | | he said: 'We cannot control market forces and we |
| of Punch and Enterprise's treatment of tenants. | | | | need to recognise that one of the great strengths of |
| 'They've ratcheted up rents time and time again and | | | | the hospitality industry is its ability to reinvent itself. |