Punch Taverns to 'hospitalise' a further 450 struggling pubs
Sounding a cautionary note on future trading prospects, Punch Taverns said today it plans to transfer a further 450 of its struggling leased pubs to its 'turnaround division'.
In a pre-close trading statement the UK's largest pub operator said it had already sold around 400 pubs from this division, which was designed to ring fence those sites that needed "closer operational support and attention" and originally numbered 1,250 pubs.
The group said it had made more than £400m through selling off pubs from both its leased and managed estates at an average multiple "of not less than 10 times earnings before interest, tax, depreciation and amortisation (EBITDA)".
A number of regional brewers including Greene King, Charles Wells and Fuller's, as well as existing lessees, have bought many of the pubs sold.
The sell-off programme, together with cost cutting efforts and the recent share placing which realised around £350m, was designed to raise funds primarily to reduce the group's debt.
The pubco said it had cut net debt by more than £1bn - 23 per cent - since the start of the financial year, buying £708m of debt back at a cost of £473m.
The news on the group's debt impressed the City, with Punch's shares being pushed up more than 20 per cent to 129.5p.
Phil Dutton, Punch's finance director, said the group was well on track to pay back its £215m convertible bond, due in December next year and he anticipated it would not breach its cash traps on Punch A and B securitisations.
Meanwhile trading in the last quarter had been mixed, due to the varied weather, Punch said.
The decline in sales across its leased pubs had slowed, but that overall EBITDA was still down around 11 per cent for the year.
Business had been hit by weaker beer sales and what Punch called "softening rents", together with increased support for licensees, currently running at £1.6m a month.
Sales of its pubs had also hit EBITDA to the tune of £6m, or £29m on an annualised basis.
The group's managed pubs had seen like-for-like sales for the year to August 22, 2009, down 1.4 per cent, with the rate of decline slowing from a 2.3 per cent fall in the first half to a 0.6 per cent slide in the second.
Managed pub sales had reduced EBITDA by around £3m, or £11m annualised.
Looking ahead, Dutton said it was too early to say there was any light at the end of the recessionary tunnel.
"It's only the government that think the recession will be over before Christmas. It's hard to see any respite [from the recession] for the rest of the year," he added.
However Punch was confident as to its long term future and expectations for the full year "remained unchanged", albeit that the short term view was clouded by continuing consumer uncertainty.
