The M&C20 Leisure Index fell to its lowest point since December this week, sliding 35 points to 1,178 – just 118 points ahead of the All Share Index, which was down 7 points at 1,059. In April it was 246 points ahead.
While both indices fell in reaction to the uncertainty surrounding a rise in interest rates, steep falls by Mitchells & Butlers, The Restaurant Group and Prezzo more greatly impacted the M&C20.
Mitchells & Butlers suffered a dramatic fall of 6.3% to 410.6p following its acquisition of Orchid Pub Company as investors reacted to the £266m acquisition of 173 pubs.
Earlier in the week leading analyst Douglas Jack was positive about the deal and said the full benefit should be realised in 2017 “as the full synergies and trading potential from rebrandings are realised. Without pre-opening costs, we estimate Orchid should add at least £30m to PBT”.
Jack, of Numis, said: “M&B has paid a full price (12.7x EBITDA; 9.9x EBITDA post announced synergies) for Orchid, but the deal works for M&B due to the 1% financing cost, potential synergies and re-branding opportunities. In addition to integrating Orchid, M&B must now target stronger LFL sales in its own estate and ensure a speedy resumption in the dividend.”
Jamie Rollo at Morgan Stanley was also upbeat on the impact of the deal for M&B, but said the upfront CAPEX means dividend resumption is unlikely until 2016.
Meanwhile broker JP Morgan Cazenove was less positive and downgraded M&B from ‘overweight’ to ‘neutral’ and its price target to from 550p to 430p. However, it lifted its earnings forecast for the full-year 2015 by 4%.
The Restaurant Group has continued its slide of recent weeks by dropping 4.4% to 590p. Jack suggested the recent share price weakness could be related to the floatation of travel concession operator SSP, believing some investors may be encouraged to withdraw funds for deployment in the SSP offer.
Similarly Prezzo, which has been named as an interested party to acquire a number of Strada sites from Tragus Group, fell 7.4% to 138.35p.
Eclectic Bars was one of only two companies (with Adnams) to see any share price growth this week, rising 1.6% to 182.6p. The premium bar operator’s shares have continued to climb for four weeks.
