Stonegate - comment

As in Punch, we might have been a little too bullish on the pub trade this year. Although our topline projections were accurate, margins are weighed down by pubs closed for refurbishment and associated expenses. Both chains are seeking to take advantage of the relatively favourable environment (compared to recently miserable years), and consequently, EBITDA fell short  - slightly at Punch and more heavily at Stonegate- to the point where it's actually down YoY, despite site profits being 5% up.  Management reiterated guidance for the remainder of the year and CapEx in the future, and considering the fundamental shift towards operator-led pubs explains the apparent softness, we retain our long in the bonds.