Liberum picks Compass, SSP and Greene King from UK leisure sector

Over the past five years, spending on drinking and eating out had rise by 21%, versus just 10% growth for doing so at home.

Pubs were still the preferred leisure establishment, but consumers had increasingly more choice and more intense inflationary headwinds were creating "operational challenges" for some, they said.

Socio-political uncertainty and lower consumer confidence were also likely to lead to tighter family budgets.

Hence, the broker said it preferred those companies who were offering "structural growth plays", outsourcing and travel hubs rather than High Street, that is, and those with the greatest pricing power and best cost levers to pull-through innovation, scale or synergy.

Liberum's top picks in the sector were Compass (buy; target: 1,850p) and SSP (buy; target: 540.0p) and Greene King (buy; target: 780.0p) for yield.

Mitchell's & Butler's (sell; target: 210.0p) and Domino's Pizza (sell; target: 250.0p) on the other hand should be avoided due to the structural challenges they would face, the broker said.

Merlin (hold; target: 515.0p) offered long-term value, but faced short-term headwinds which at this point in time outweighed the risks, while Elegant Hotels (buy; target: 125.0p) offered "deep value".