Bloomberg Analysts Warns U.K. Retail Demergers Should Await Consumer Return

First-quarter sales at Costa Coffee surged 23 percent, Whitbread said last week, while sales at its budget hotel chain Premier Inn rose 8.1 percent. The company plans to double the size of Costa Coffee to 3,500 stores worldwide over the next five years.

“Nothing is likely in the near term,” Ellis said June 23. “It isn’t the easiest market environment to sell into at the minute, with ongoing consumer pressures. They would be better to hold off. It is now at the stage where a lot of investment in overseas markets is starting to bear fruit.”

The planned demerger of Punch Taverns Plc (PUB) this year to separate its leased pub division from Spirit, the faster-growing managed pub estate that includes Chef & Brewer, is unlikely to create shareholder value as weak consumer spending hurts leased outlets, say analysts.

“My valuation is 70 pence for Spirit and five pence for the Punch part of it,” Paul Hickman, an analyst at Peel Hunt, said in a phone interview on June 23. “It is fairly valued at the moment. The demerger is the delayed result of a company hitting the recession with too many pubs and too much debt. While trading is quite difficult, what they are doing is appropriate.”

Punch climbed 1.9 percent to close at 71.35 pence a share in London trading on June 24.

Punch Taverns is making “good progress” with its demerger the company said on June 8. The demerger needs the approval of bondholders.

Punch Taverns Demerger Trading Results

Punch Taverns is expected this week to point to continued robust trading at its managed pubs as support for its controversial plan to demerge the business from the struggling tenanted division.

New chief executive Ian Dyson angered bondholders of the heavily indebted group last month by unveiling plans to split the business in two by the end of the summer, spinning off Spirit, the group's managed pubs business, into a separately-listed company.

Dyson, the former finance director at Marks & Spencer, who took over at the Punch helm last September, also revealed that he wants to sell more than 2,200 sites at Britain's second biggest pubs group, which is struggling under £3.5 billion of debt.

Punch, which announces its interim trading results on Tuesday, revealed in a recent trading update that Spirit's like-for-like sales shot up 8.6 per cent in its second trading quarter.

That compared with a 6 per cent sales fall in the tenanted business.

Punch Taverns Demerger; Share Price up 4%

Punch Taverns is to split its business in two and sell thousands of pubs as part of a major overhaul of the firm, reports the BBC.

Punch, the UK's biggest pubs group, said it would split its managed and leased pub operations to create two new public companies.

The size of the leased business will be halved to about 3,000 pubs.

The managed side will be named Spirit, with some pubs changed to existing brands such as Chef & Brewer, Fayre & Square and Flaming Grill.

Punch Taverns has been struggling with falling profits and rising debt, which hit £3.3bn last year.

Its shares rose 4% following the announcement.