Pubs group happy to be punching strongly

Britain's biggest pubs group is on course to cheer stronger-than-expected annual profits although the trading outlook remains "uncertain".

Punch Taverns, which owns or manages more than 7,000 watering holes including nearly 400 in Scotland, said underlying earnings were likely to be marginally ahead of previous expectations.

In a trading update it highlighted a summer sales boost at its new-look managed estate.

The group said like-for-like sales in the division grew 2.6 per cent in the fourth quarter to the end of August, an improvement which helped reduce the decline for the financial year as a whole to 2 per cent.

As well as favourable weather in June and July and the positive impact of the World Cup, Punch said it benefited from increased investment and the roll-out of more food-led sites such as Fayre & Square and Chef & Brewer.

The managed business - formerly known as Spirit Group - benefited from about a quarter of its 800-strong pub estate being refurbished during the financial year.

Fourth-quarter sales improved in the leased and tenanted division, which boasts more than 6,300 pubs, although like-for-like profits will be down by some 10 to 11 per cent due to an ongoing squeeze on drinks margins.

Pub failures in the estate have halved and financial support to tenants has stabilised at just under 2 million a month, Punch added.

Analysts at stockbroker Panmure Gordon raised their full-year profits forecast for the group to 131.5m from 128.2m following the update.