Punch Taverns performance 'in line with expectations'
In an interim management statement, the company said that while the average quality of its estate is expected to improve as it sells non-core assets, it expects core estate net income to decline in the current financial year in line with that experienced last year, as the company rebalance rents in the short-term. A return to growth is expected in the next financial year.
The group said that trading comparatives were much more challenging in the first half of this year and given this, net income in the core estate was down 5% on a like-for-like basis, in line with management expectations.
It said that trading comparatives are expected to improve in the second half of the year when it believes the business will also benefit from the recent improvements in letting and investment activity.
The company said that it ended the second half of last year with record levels of letting and investment activity and that this increased level of activity had continued into the new financial year.
It said that the percentage of core pubs on substantive agreements was strong at 94% and that it was seeing healthy levels of interest from new applicants, supported by the recent launch of its new recruitment website.
The level of pub failures remains in line with last year, leaving 176 core pubs (6%) available for letting of which 70 have new partners in place awaiting legal completion.
Punch said that it continued to build on the popularity of the Punch Buying Club with 53% of its drinks orders now placed online, up from 25% in December 2011. It recently completed its 2012 roadshows, which it described as the most successful to date, surpassing previous record attendance with 53% of its Partners attending.
The company is now rolling out its new Punch Franchise Tenancy agreement for its community local pubs aimed at new entrants to the sector nationally.
It said: “We have increased the size of specialist field teams in the areas of investment, marketing and food development. The roll-out of free WiFi across our pub estate has been well received with over 1,500 Partners having already signed up for this offer. At the same time as increasing our specialist field team support, we have made further head office efficiencies, as we continue to focus on cost reduction as the size of the non-core estate reduces.”
Punch said that its non-core estate disposal programme remained on track. Since commencing this programme in 2011 it has realised proceeds of £193m from 758 pub disposals, slightly ahead of book value.
It expects to sell c.400 non-core pubs in the current financial year, having disposed of 86 pubs in the current quarter (including 11 pubs from the core estate) for proceeds of £26m.
As reported at the time of its full year results announcement, its Board has completed a detailed review of the group's capital structure, and is now progressing discussions towards a financial restructuring of the business.
It said that current discussions with certain major shareholders and other significant stakeholders remained ongoing and, following the completion of a noteholder identification exercise, will be extended to include noteholders in both the Punch A and Punch B securitisations.
It said that on the basis of the dialogue with stakeholders to date, it continues to believe that a restructuring can be successfully implemented.
Roger Whiteside, chief executive, said: “Our performance in the first 16 weeks of the financial year has been in line with management expectations. While the UK consumer environment is likely to remain challenging for at least the near-term, we continue to make good progress with our clear operational plan to return the core estate to growth in the medium-term and extract maximum value from our non-core assets.”
