As pleased as Punch!
Punch Taverns has announced a jump in profits, against the run of a generally sluggish market, writes John Porter.
If you believed even half of the more strident publicity that has dogged the major tenanted and leased players over the past year - especially when the Trade & Industry committee investigation was at its height - you'd wonder why anyone would want to take on a pub lease.
The fact that there are still plenty of potential licensees out there is undoubtedly evidence of the continued strength of the dream of running you own pub.
More importantly, the fact that so many of them are doing it successfully suggests that the big players can't be quite the ogres that some of their vociferous opponents have suggested.
Punch Taverns, the country's second-biggest pub operator, says it is receiving record numbers of applications from potential pub retailers. Even more importantly, says chief executive Giles Thorley, "we continue to witness the tremendous success of many of our entrepreneurial retailers in developing their businesses".
Mr Thorley made his comments as Punch announced an impressive set of interim results, by any standards. The company, which operates 7,800 leased and tenanted pubs, has reported a 33 per cent increase in turnover to £404m for the six months to March 5.
Organic growth
As well as the earnings boost from the acquisitions of Pubmaster and InnSpired, Punch said organic business growth has contributed to a 37 per cent increase in pre-tax profits to £99m, with the interim dividend being increased by 28 per cent to 3.7p.
This continued growth in sales and profit saw an increase in like-for-like turnover of 3.4 per cent in the original Punch estate. However, the company sounded a cautious note on calculating full like-for-like results for Pubmaster and InnSpired.
"Informally", it estimates that first-half average turnover increased by 3.1 per cent in the Pubmaster estate, and by 2.1 per cent in the InnSpired estate.
The company also stresses the support it offers tenants. It says more training is being offered than ever before, with 940 retailers being trained in the first half across 7,146 training days. Courses offered included induction, marketing and investment. Punch has also successfully piloted a programme emphasising retailing skills and customer service, and is now rolling this out across the estate.
Also across the six months, £26m was invested in almost 400 pub development projects across the estate and these projects have achieved a return on investment of 25 per cent. The company says there are yet more opportunities to invest throughout the estate - especially in the former Pubmaster and InnSpired pubs.
With the move to the new licensing regime now under way, the company has adopted "a very active role in helping our retailers take advantage of the increasing flexibility that will become available", according to Mr Thorley.
While the changeover has placed a considerable burden on the trade, Mr Thorley says: "We believe that the changes will bring benefits for ourselves and our retailers in the medium term." The majority of Punch licensees are seeking "modest but important" extensions to opening hours, he added.
Punch has also taken a pro-active approach to smoking reform, encouraging licensees to provide non-smoking facilities where practical, and to end smoking at the bar.
In the short term, the company expects this approach to attract new customers, while preparing the way for further regulation to come.
While many operators are reporting tough current market conditions, Punch says it has seen a "satisfactory" start to trading in the initial weeks of the second half.
Proven resilience
However, Mr Thorley sounds a cautiously optimistic note, saying that "while there are some recent suggestions that consumer demand has cooled, Punch has a model which has proven its resilience over many years. We are confident of a satisfactory outcome for the year".
He adds: "The group has had an excellent first half and these results are testament to continued underlying organic growth in sales and profit across the estate, together with a strong performance from both the Pubmaster and InnSpired acquisitions."
Punch now owns around 14 per cent of pubs in the country and has previously indicated that the estate could realistically grow to 10,000 or more. As the City digests the company's latest strong performance, Mr Thorley elaborates: "We continue to see good potential for further sector consolidation and remain well placed to take advantage of future acquisition opportunities."
