Profits down for Punch Taverns as pub restructuring continues
STAFFORDSHIRE-based pub operator Punch Taverns has seen a fall in full year pre-tax profit as cash-strapped customers continue to stay at home rather than eat or drink out.
The Burton-upon-Trent firm, which demerged from its Spirit operation in August, saw pre-tax profit for the year to August 20 reach £76m (2010: £90m) based on revenue of £258m (2010: £291m).
Basic earnings per share were also down at 8.6p (2010: 9.9p), however, there was better news on debt as the firm paid off £133m (5%) of what it owed.
Chief executive Roger Whiteside said the UK on-trade market remained challenging with the long-term decline in drinking-out in pubs expected to continue.
The firm’s demerger from Spirit was in part a response to the need to generate better sales for its best performing pubs and to review the future of the poorer performing wet-led pubs.
The so-called wet-led pubs – those which rely on the sale of drinks rather than food – comprise around 40% (2,053) of the group’s estate yet only account for around 24% of Punch’s outlet EBITDA.
These pubs have a much lower average net income per pub at approximately £39,000, and are predominantly small, with a low turnover. Many are unlikely to survive the review and will be sold off.
“With limited scope for investment these pubs are more likely to be impacted by the long-term decline in drinking out and as a result are expected in time to generate more value through disposal than retention,” said Mr Whiteside.
He said the decline was driven by a combination of changing consumer behaviour, costs and the impact of “punitive tax and excessive regulation” and this would continue to affect the whole industry and not just Punch.
Due to the situation, the firm is concentrating on improving its biggest revenue earners.
Its core division comprises 2,951 pubs, which account for around 76% of Punch outlet EBITDA. These pubs have a much higher average net income per pub than the turnaround estate at approximately £78,000, and Mr Whiteside said they had demonstrated much greater resilience with a decline in net income of just 2.1% in the year.
Overall, Mr Whiteside said he was pleased with the progress the firm had made and the results were in line with expectations.
“These results have been achieved despite the challenging UK economic, regulatory and fiscal conditions, which continue to impact on the licensed trade sector,” he said.
“It has been a year of significant change for the business driven by the group’s strategic review and the subsequent demerger of the Spirit business. The demerger was completed on schedule and with minimum disruption, allowing us to maintain focus on our goals as a solely leased and tenanted business.
“Our aim now is to become the UK’s highest quality, most trusted and best value leased pub company. We are focused on creating value for our shareholders through successful long-term partnerships with our licensees in our core estate of 3,000 of the highest quality, best invested leased pubs in the country.”
