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Goldman Sachs employees may celebrate their bonus achievements in champagne these days, but they still remember when it was down to the local for a good, old-fashioned pint. Not anymore, it seems.
The pub trade has about as much appeal to them as a flat pint these days, a point Goldman appears happy to make.
It has slashed its rating for the 2000-strong pubs chain operator Mitchells & Butlers, which includes All Bar One and Harvester, from neutral to sell and has added the shares to its influential conviction sell list. Rival broker Altium Securities has cut M&B from buy to hold.
Goldman has also moved rival Enterprise Inns from neutral to sell while trimming its target for M&B from 230p to 220p, which means one share wouldn't even cover you for the cost of a pint in one of its pubs.
It's not difficult to see why Goldman has taken such a bearish stance. The big surprise is that it didn't do it earlier. The pub trade has been in decline for several years, hit by the smoking ban, the credit crunch and cheap booze competition from the supermarkets. That has sent pub companies' share prices tumbling and brought them to the brink of breaching their banking covenants on loans running into billions of pounds.
Take for instance the M&B share price, which has collapsed from a peak of 898p before the smoking ban was introduced in pubs across the UK. The shares were today changing hands ½p lower at 280¼p, after touching 265½p.
Enterprise Inns, 1.8p up at 158.8p, has fared little better. Its shares have slumped from the 769p level during the same period.
Earlier this month, M&B promoted Adam Fowle to chief executive. He replaced Tim Clarke, who resigned after the company lost money closing out debt positions relating to controversial hedged positions.
Shares generally raced up to a 2009 high after the economies of France and Germany confirmed a return to growth during the second quarter. It came hard on the heels of bullish comments from the Federal Reserve overnight that the worst of the US recession may be over. That was matched by strong gains on Wall Street. In London, the FTSE 100 index sported a rise of 43.9 at 4760.7, its highest level since 3 October, last year. Only yesterday, the Governor of the Bank of England, Mervyn King, warned that the recession in this country was likely to be "slow and protracted".
Petrofac, the oil industry services group, stood out with a rise of 61p at 896½p as institutional investors rushed to top up their holdings. Petrofac is to be included in the influential MSCI UK index.
British Land enjoyed a burst of speculative buying, lifting the price 8.4p to 489.8p, after touching an intraday high of 513p, as more than seven million shares changed hands, well in excess of the normal daily average. Word is, one of those cash-rich sovereign wealth funds has been building up a stake in the property developer.
The City gave the thumbs-up to half-year results from the UK's largest life assurer Prudential, which increased the payout to shareholders. The shares responded with a rise of 34.7p at 514p. Only last week two of its biggest rivals Legal & General, up 0.9p at 66.2p, and Aviva, 11.3p better at 382.3p, cut their payouts.
London's performance was also bolstered by a return to favour among the miners despite claims the Chinese have ceased stockpiling raw materials. The weaker dollar has given a boost to prices of commodities, such as iron ore and copper. Dealers are also pinning their hopes on a surge in demand once the global economy picks up. Randgold Resources put on 117p at 3628p, while Rio Tinto added 103p at 2415p and Anglo American 82p at 1947p.
Banks enjoyed a resurgence in demand with Barclays climbing 8.5p to 361.8p, while Lloyds Banking Group rose 3p to 99.9p, and Royal Bank of Scotland firmed 1.4p to 46.6p. HSBC made the most of today's strong performance in Hong Kong with the shares up 15.2p at 668.3p.
Yesterday's £535 million bid by China's Sinochem for Emerald Energy, 1p better at 739p, has focused attention on Gulfsands Petroleum, 1p firmer at 220½p, as a potential takeover target. The speculators say the terms of the Emerald deal already values Gulfsands assets at more than 300p a share. Emerald and Gulfsands already share assets and operate together in Syria and dealers say a move by Sinochem for Gulfsands cannot be ruled out.
