Afternoon:
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Jon Moulton, the head of private-equity house Alchemy, has been known to say he does not create value but he does restore it.
In other words, he takes on good businesses that have got into trouble because they have been badly run and can be bought cheaply. He then runs them properly, rebuilds their profits and makes a pile of money.
Whether Regent Inns, the pub company we learn he is stalking, falls into the badly-run camp can be debated but it is certainly cheap. The shares, which now trade at around 20p, stood above 120p less than a year ago. Their fall is testament to something that has been remarked upon rather less than it should be: valuations in the pub sector have plunged.
One reason is clear enough. Pubs are closely identified with consumer spending and people have less money to spend. Going to the pub less frequently is one of the simpler ways to economise. That on its own would be enough to dent sales but they also have the impact of the smoking ban, which bears particularly hard on pubs in urban areas that are unable to provide outdoor facilities for smokers.
McQueen, an investment banking boutique with an encyclopedic knowledge of the leisure sector, reckons the current woes will lead to another round of pub consolidation which will have two main ingredients. The big pub companies will get even bigger, probably by taking out the quite large number of middle-sized pubcos - such as Regent - which are finding it ever harder to compete because they simply don't have the muscle to get the best prices from their beer suppliers.
Second, the overall number of pubs will plunge because a lot of the individual, still independent landlords will give up the struggle. McQueen's specialists predict a quite dramatic reduction in overall numbers in the next few years.
Another way the pub landscape will change is that those who were seduced in recent times into separating the property from the operations may well live to regret it. Such refinancings, pushed by the likes of Robert Tchenguiz, may be OK in a bull market. But most have a built-in ratchet which increases the rent by about 2.5% a year. The operational side may be able to cope with this in a bubbling market but not when trade goes flat, so it will be interesting to see how such deals pan out.
In this regard, Laurel is one to watch.
So is Mitchells and Butlers. Its accounts still preserve the fiction that its property deal could yet happen, and by implication that the £200 million set aside as a provision against an unnecessary hedge might yet prove to be unnecessary.
Word in the trade is that it has launched a price war - that most suicidal of business strategies - in an effort to maintain market share. If it follows through on the plan, it will do little for profits, though the management could be forgiven for taking the view that its shares are so bombed out, not much worse can happen to them.
One wonders, however, if the aforementioned Tchenguiz, property entrepreneur extraordinaire, would be so phlegmatic.
His business is largely private, but at a time when the commercial property market is suffering and the shares of property companies have fallen by 50% it must be a source of concern to him that his two big public bets - in shares of M&B and also, of course, at the supermarkets giant Sainsbury - have both failed to come off, leaving him with losses on paper running into an eye-watering tens of millions of pounds.
He has deep pockets, of course - but no longer as deep as they were. These are tough times.
A message on what's to come
LOMBARD Street Research, the economics consultancy, has been ahead of the curve throughout the credit crisis, so it was no surprise that its leading protagonists played to a packed house yesterday as they gave their views on what happens now.
There is not the space here to do justice to their arguments in detail, the more so because, as befits economists, they did not speak with one voice. But here are a few of the main themes.
One of the first to stick in the mind was that house prices do not have to fall to take the wind out of consumer spending. A standstill would be enough. Rising house prices have driven spending and spending is the main source of growth, so without it the growth rate must fall. The good news is, don't expect a cataclysmic drop in house prices - rather a correction of 5%-7%.
Second, company balance sheets are in good shape, but Government and personal finances are a mess. Two things flow from this. It will be difficult, if not impossible, for the Government to stimulate the economy to mitigate the slowdown. Also, the slowdown will be long and drawn out because it will take years for individuals to get their finances back into shape - unless, of course, they default.
Don't expect the Bank of England to help much either. It will do what it can, but it failed to curb money supply when it could and should have 18 months ago and as a result inflation lurks. This restricts the Bank's ability to cut rates as much as they need to be. Its other constraint is the need to avoid a rout in sterling, which has already fallen sharply this month. A lower pound will help exports but too rapid a decline will give a further boost to inflation.
The third message was not to expect China to keep the world growing. The slowdown in the West, combined with the weaker dollar and sterling, will choke off demand for its exports. It is nonsense to believe domestic demand could be expanded to take up more than a small portion of the slack. In time China too will feel the pain and slow down.
Finally, don't think in terms of recession. What we are looking at is a period of slower growth - slow enough to create a much tougher business environment, but not one to cause widespread unemployment. Given the excesses of the bull market party, we may well get away with a relatively light hangover.
