Punch flags up slight fall in annual core earnings

PUNCH Taverns, whose 3,500-strong estate includes about 300 sites in Scotland, is set to unveil a slight fall in yearly earnings as it continues to ­offload pubs to reduce its debt mountain.

Punch Taverns is the UK's second biggest landlord. Picture: PA

In a trading update yesterday the firm said that it expected to report underlying earnings of between £193 million and £200m for the financial year to 22 August, in line with market expectations. That would compare with £205m the previous year.

Punch Taverns, Britain’s second biggest landlord, said it reduced its debt by £513m to £1.4 billion, adding that the value of its estate stands at £2.1bn.

Last October Punch completed a deal to restructure £2.3bn of debt, having been saddled with large liabilities after embarking on a major expansion before the financial crisis.

Duncan Garrood, the company’s new chief executive, said: “The business has ended the year with a solid set of results, in line with our expectations.

“The business has clear plans for further debt reduction and will benefit from being able to focus more resources on the higher quality core pub estate.”

Garrood said that since joining Punch on 15 June he had been “excited by the opportunities I see in the business”.

Last week the Burton-on-Trent-based group agreed to sell 158 pubs to property firm New­River Retail for £53.5m as part of its strategy to dispose of less profitable pubs. NewRiver Retail is a real estate investment trust focused on the retail sector.

Punch added the sale left it with about 2,900 pubs in its core estate, and about 550 non-core outlets. The deal is expected to complete on 11 September.

Punch said that over the full financial year its proceeds for disposals reached £89m – ahead of earlier guidance, above book value and at a multiple of 26 times its underlying earnings.

The latest outlets were sold for an average price of £340,000. The group said its higher quality core estate generated an average profit per pub 4 per cent higher than a year earlier.

It added that the core pubs were expected to account for about 95 per cent of its pub earnings in the next financial year. Punch has said it wants to sell down its non-core estate at a rate of about 200 a year.

Elsewhere, Spirit Pub Company, the managed pub business spun out of Punch in 2011, recently agreed a £725m takeover by Greene King.

Punch will report its full-year results on 12 November. Brokers at Numis expect the group, owner of the Ensign Ewart in central Edinburgh, to see its annual pre-tax profits lift by 46 per cent to £56.6m.

The analysts forecast annual like-for-like sales will be slightly positive, up from 0.5 per cent in the first half, aided by improved trading from pub investment and staff training.

Last year Punch’s annual like-for-like sales rose 1.3 per cent.

One leisure analyst commented: “It looks a case of steady as she goes at Punch, both in terms of underlying organic trading and the disposal and debt reduction programme. No big surprises from left-field are likely when the results come out.”