It is especially remarkable because in a pure financial sense yesterday’s strategic rethink may be viewed as a zero sum exercise. It will, probably, sell some assets and, probably, return most of the capital to shareholders. If markets worked anything like perfectly, DMGT’s share price of Tuesday would reflect the capital whether it was invested in regional newspapers or given back to shareholders.

The possibility that DMGT might secure a premium price for agreeing to cede control of Northcliffe may be worth something. The assumption that DMGT will be free to concentrate on emerging information businesses with high growth prospects may have prompted a share price re-rating too. But 11 per cent? And won’t DMGT’s risk profile increase if it lets the regionals go? And is there not a chance that DMGT is over-egging the potential in newer information businesses and underestimating the untapped growth possibilities at Northcliffe?

There is no reason to believe that yesterday’s news heralds a reformation of DMGT’s antediluvian share structure. Antediluvian is not necessarily all bad, but the dual share structure — which loads the Rothermere tribe with control of the company while allowing others to provide the bulk of the share capital — does cheapen the non-voting A shares.

If the A shares were to be enfranchised the stock might justifiably rise by at least a tenth. But it is not on the agenda. A corporate reorganisation of this sort would be the ideal time to reform. Since it is not in the plan, investors must assume enfranchisement is, and will remain, off the agenda.

Northcliffe accounts for half DMGT’s annual profit. It is income that the company will miss. Buybacks will reduce shares in issue and the overall cost of the dividend. The payout is covered a healthy 3.5 times by earnings, which is comforting. But if the revamp backfires the dividend might have to be “rebased”.

The shares, which are knocking up against five-year highs, should be sold.

Mitchells & Butlers

IT IS extraordinary to think that Mitchells & Butlers, the pub operator spun off from the old Bass brewing empire, now sells more food than it does beer. Not so long ago, a consumer downturn would mean that people spent less on eating out but more on beer as they drowned their sorrows. Now it is the opposite.

There are structural reasons for the continued decline in beer sales in pubs, not least the drink-driving laws and the trend towards home entertainment. In recent months, this has been exacerbated by the proliferation of cheap supermarket beer — a phenomenon that the Government has been remarkably slow to look at in the context of binge drinking. The biggest factor in the 9 per cent rise in like-for-like food sales reported by M&B yesterday is the cheapness of the meals its serves in such eateries as Harvester and Toby. Last year it sold 75 million main meals at an average price of £6 and claimed that, for many dishes, it is cheaper to eat at one of its pubs than at home after taking into account the time spent cooking.

All of which begs the question of how M&B, in contrast with many rivals, can continue to produce strong numbers despite soaring external costs such as utilities, wage costs and business rates, not to mention softening consumer demand.

The answer is simply good operational and financial management. Although pricing is stagnant, M&B has found the knack of driving up volumes while keeping a lid on the costs it can control. Its focus on staff productivity, service and range of products allied to the undoubted value for money have proved a winning combination.

Financially, it has also proved adept at managing its balance sheet, allowing it to promise a further £100 million share buyback this year on top of the £100 million returned to investors last year. This flexibility could mean a further £300 million return, although it is holding fire in case it is able to buy part of either Spirit Group or Whitbread.

This is a company that, instead of moaning about tough market conditions, has taken control of its own destiny. Buy.

London Merchant

LONDON Merchant Securities, which combines property development and private equity investment, has puzzled sharehodlers for an age and a half. How can there be merit in operating these chalk and cheese businesses alongside one another?

As it happens, LMS has managed that task quite nicely over the years. But if shareholders as a whole will sleep easier if the two sides are separated, separation is to be welcomed. Quite apart from anything else, the share price is likely to improve.

Numbers posted yesterday show the property business has a healthy £200 million development programme and its property investment portfolio is performing well with values up 7.7 per cent on a like-for-like basis at the half-year stage.

The smaller investment division, which has stakes in a number of energy, technology and leisure businesses, was obliged to write down the value of its private equity stakes by £28 million to £219 million, which sends a poor signal. But it also leaves room for nice surprises further down the line. Buy the shares.

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