Punch hit by 5% income fall but confident of expectations

MIDLAND pubco Punch Taverns has said it expects profit performance to be in line with management expectations despite net income in its core estate falling 5%.

In a trading update the firm said that average profit per pub is stable and the performance had been achieved despite challenging market conditions.

“Whilst the average quality of the estate is expected to improve as we sell non-core assets, the core estate net income is expected to decline in the current financial year in line with that experienced last year as we rebalance rents in the short-term, with a return to growth expected in the next financial year,” it said.

“Trading comparatives are much more challenging in the first half of this year and given this, net income in the core estate is down 5% on a like-for-like basis, in line with management expectations.  Trading comparatives are expected to improve in the second half of the year when the business will also benefit from the recent improvements in letting and investment activity.”
The group said it ended the second half of last year with record levels of letting and investment activity and this increased level of activity had continued into the new financial year.
The percentage of core pubs on substantive agreements was said to be strong at 94% and it was seeing healthy levels of interest from new applicants, supported by the recent launch of a new recruitment website.  The level of pub failures remains in line with last year, leaving 176 core pubs (6%) available for letting of which 70 have new partners in place awaiting legal completion.
The firm is also rolling out nationally its new Punch Franchise Tenancy agreement for its community local pubs aimed at new entrants to the sector.  

The non-core estate disposal programme remains on track.  Since commencing the programme in 2011 the group has raised £193m from 758 pub disposals, slightly ahead of book value.  It expects to sell around 400 non-core pubs in the current financial year, having disposed of 86 pubs in the current quarter for £26m.
Following the detailed review of the group’s capital structure, the firm said it was now progressing towards a financial restructuring of the business and remained in talks with key stakeholders.
“On the basis of the dialogue with stakeholders to date, the board continues to believe that a restructuring can be successfully implemented,” it said.  
Roger Whiteside, Punch chief executive, summed up by stating: “Our performance in the first 16 weeks of the financial year has been in line with management expectations.  While the UK consumer environment is likely to remain challenging for at least the near-term, we continue to make good progress with our clear operational plan to return the core estate to growth in the medium-term and extract maximum value from our non-core assets.”