Help for landlords hits Punch profits

PUNCH Taverns, the UK’s biggest pub operator, said yesterday it had stepped up its efforts to support hard-pressed licensees as it posted a 20% fall in half-year profits.

Punch, which owns around 7,100 pubs across the UK, including around 130 in Suffolk and north Essex, is now providing �2million-worth of help for landlords each month, up from �1.6m a year ago.

The group said this had impacted on its earnings, with underlying pre-tax profits for the six months to March 6 falling to �66m, against �82m for last year’s first half.

Pubs have suffered in recent years through a combination of increased alcohol duties, the smoking ban and a slump in spending by recession-hit consumers.

However, Punch said it had received an Easter boost since the end of the first half, with trading over the long holiday weekend “good and slightly ahead of last year” in the managed estate.

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Punch added: “While we remain on track to meet our expectations for the full financial year we are mindful that market conditions remain challenging and are likely to continue to be so for the near-term.”

The half-year figures showed the rate of like-for-like earnings decline in the leased pub estate stabilised at 11% throughout the half-year. Punch has offloaded another 524 non-core leased pubs since the start of the financial year as it seeks to cut the group’s debt pile.

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The managed estate saw broadly flat like-for-like earnings over the half-year, as the poor weather at the start of the year led to a 3.4% drop in comparable sales, offseting a 0.3% increase in profit margins.

Most of the company’s support for licensees has taken the form of concessions on rents and beer prices. Punch said the increase in beer prices charged to most landlords had been limited to 1%, against an average wholesale price increase of 3%, the rest of which the company had absorbed itself.

Geoff Liyanage, area manager for Punch in East Anglia, said trading in the region had been much in line with the national trend, with beer volumes down 10% year-on-year.

However, sales of cask conditioned beer were in growth, and Punch would continue to support pubs in hosting beer festivals to help them benefit from the interest in “real ale”.

In addition to the programme of support for licensees through rents and beer prices, Punch was also investing an additional �20m on top of its normal capital programme to help 450 pubs around the country take advantage of identified growth opportunites, said Mr Liyanage.

A series of one-day training courses is also being held, including one designed to help pubs cash in on this summer’s World Cup.

Punch has faced the additional challenge in recent weeks of seeking a new chief executive, following the announcement last month that Giles Thorley is to stand down after nine years with the group. Punch said yesterday it was close to finding a successor.

Analysts at Panmure Gordon noted encouraging signs in the leased and managed estates and said “significant shareholder value” could be created if the group halted the like-for-like sales decline in managed pubs and began to rebuild profitability.

They added that the appointment of a new chief executive should also act as a “positive catalyst” for the company’s shares.

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