Punch suffers blow to profits

MIDLANDS-based pub operator Punch Taverns has announced an 18% fall in interim profits and warned that trading conditions are likely to remain challenges.

In a report covering the period the 28 weeks to March 6, the Burton-upon-Trent firm said it had seen pre-tax profits decline to £66m, compared to £82m in the corresponding period last year.

Peter Cawdron, chairman of Punch Taverns, said: “There is no doubt that conditions remain challenging across the economy and especially in the pub sector.”

The company said that despite the difficult conditions, its trading was in line with expectations.

It recorded EBITDA of £225m, which compared with £275m in the same period last year, while the disposal of mainly non-core assets helped raise ££198m.

The firm also reduced its net debt by 5% (£188m) to £3,277m – a total reduction of £1,254m (28%) over the last 18 months.

It said it continued to make good progress with its asset disposal programme, which was focusing on non-core asset sales. This was on-track to generate around £300m for the full financial year.

“Debt repayments have helped maintain headroom against financial covenants and we are confident that actions management has taken to date and continues to take will provide sufficient ongoing headroom to our key DSCR financial covenants,” added the statement.

On its leased properties, it said the number of pubs returned to it stood at their lowest level for two years and 40% down on the previous year, while 82% of the estate was let on substantive agreements, which was in line with the end of the last financial year.

Lessee partner support levels were stable at £2m per month, it added.

To make its pubs more appealing to customers, it said beer price increases had been limited to 1% against wholesale price increases of 3%.

On the managed estate, Punch said it had completed the implementation of its Operational Excellence programme and that employee retention was up 40%, with guest advocacy measures up 15%.

Operating margin had stabilised and new pilot projects were complete with rollout across the estate set to begin in the second half.

“We firmly believe that the actions we have taken and will continue to take are the right ones to deliver long term sustainable growth for Punch and all stakeholders,” added Mr Cawdron.