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Punching below its weight

Latest results from Punch Taverns saw the pub group report a 20% drop in earnings. The company reported pre-tax profits of £66 million for the six months to 6 March 2010, down from £82m for the same period a year ago, when the pub sector was feeling the full force of the recession.

As it seeks to support its 7,100 sites, the UK’s second largest pub operator has increased rent concessions and special discount schemes to the value of £2m each month.

The company used this support package to explain the 40% decrease on last year in the number of leased pubs being returned from its partners. It further attributed this improvement to the fact that the majority of its beer prices for tenants had increased by just 1%, compared with wholesale price hikes of 3%.

Punch drew positive comment from the performance of Matthew Clark, its joint venture with Constellation Brands, which contributed £2m after tax to the group during this six month period.

The company managed to reduce its debts by 5% to £3.277m and maintained it was “on track to generate £300m of proceeds for the full financial year.”

However, this was balanced by a note of caution: “Given the lack of visibility over future trading in a challenging market environment there could be circumstances where forecast revenues or cash flows are lower than expected.”

In an effort to balance its books, Punch has disposed of 524 pubs in the last financial year and this activity is set to continue as it identifies underperforming sites. The group has also invested £20m to help 400 pubs benefit from the anticipated uplift from this summer’s FIFA World Cup.

Peter Cawdron, chairman of Punch Taverns, sought to reassure shareholders while managing expectations, saying: “There is no doubt that conditions remain challenging across the economy and especially in the pub sector.

"Punch is committed to working with its licensee partners, employers, trade bodies, regulators and guests to support the future of the great British pub.”

The group has yet to appoint a new CEO following the departure of Giles Thorley in March.

Gabriel Savage, 27.04.2010

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