Punch to report 40% drop in annual profits

SCOTLAND'S biggest pub landlord, Punch Taverns, is braced for a nearly 40 per cent fall in annual profits when it reports its figures on Wednesday.

Analysts are predicting pre-tax profits of around 161 million, well below the 262m seen in the previous year.

While Punch benefited from good weather in late June and early July, it said at the end of August that the rest of the summer had been unhelpful for trading.

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But the firm at least arrested the rate of decline seen earlier in the year in its 7,000-strong tenanted division, with an 11 per cent fall in underlying earnings for the 52 weeks to 22 August.

Punch, which is burdened with a 4.4 billion debt pile, said in September it was offloading 300 of its worst-performing outlets. The firm has more than 1,000 pubs in a "turnaround" division earmarked for sale.

Nomura analyst Simon Larkin warned the results would be "severely impacted" by heavy falls in the worst-performing 20 per cent of its tenanted estate.

"While we expect to see profits from these pubs stabilise, our concern going into 2010 is that Punch's income from its better pubs may continue to deteriorate, partly due to further pressure on market beer volumes, but also due to increasing pressure on rental income," he said.

The company recently carried out a 375m fundraising with shareholders in order to avoid having to dispose of core parts of its pub estate.

Punch has some 450 leasehold pubs and 30 managed pubs in Scotland, in towns including Dunfermline, Dundee, Arbroath, Edinburgh, Glasgow, Paisley and Wishaw.

The firm is in the process of selling off more than 30 of its most troubled hostelries north of the Border, with the aim of attracting shopkeepers and property developers as well as would-be publicans.