Full-year net income up 1.3% at Punch

By Mark Wingett, M&C Report

- Last updated on GMT

Related tags: Core estate, Generally accepted accounting principles, Punch

Punch Taverns sais it was making steady progress as it delivered its full-year results
Punch Taverns sais it was making steady progress as it delivered its full-year results
Punch Taverns has this morning reported a 1.3% rise in like-for-like net income across its 2,925-strong core estate – which marks five consecutive quarters of growth, and said it could now focus on improving its business through investment in its pubs and attracting the best partners to work with.

The company said it had made positive start to the new financial year with its core estate in like-for-like net income growth of 0.8% and realised £43m of proceeds from the sale of non-core and gold-brick sites.

EBITDA for the 53 weeks to 23 August stood at £205m (2013: £216m), while pre-tax profit stood at £69m (including £30m of profits attributable to bond purchases in H1) (2013: £49m; no profits attributable to bond purchases.

The company said it was delivering the business plan “with steady progress in all areas of the business”.

Investment

The percentage of core pubs on substantive lease and tenancy agreements at the end of the year was 95% and has been within Punch’s target range of between 93% and 95% throughout the year.

Across its core estate new partner applications were up 20% on the prior year. It has invested £43m in the core estate at an average of c.£100,000 per pub. Average net income per pub was approximately £74,000.

Of the pubs in its core estate, 37% have now benefitted from a meaningful investment of over £40,000 in the last five years. The company’s target is for 65% of the core estate to have meaningful investments and it said it has a strong pipeline of investments, taking advantage of this opportunity.

Disposals

The period marked the first full year of the company’s New Business Development team, which it said had delivered double digit sales growth.

It transferred 116 pubs from its 884-strong non-core estate to its core estate during the period. The group said that its disposal programme was on track with the disposal of 285 pubs (including 65 from the core estate), realising net proceeds of £111m, at a multiple of 19 times EBITDA.

The non-core estate had a book value of £227m and accounted for 12% of Punch outlet EBITDA by the end of the year. These pubs have a much lower average net income per pub at approximately £37,000 per annum are predominantly small, with low turnover and are wet-led.

Pubs remaining in the non-core estate are managed under the three categories of (i) protect (403 pubs), (ii) sell-later (270 pubs) and (iii) sell-now (211 pubs). Punch said it had successfully stabilised performance in the year for the pubs within the 'protect' category, delivering a like-for-like net income growth of 0.4%, with an average profit per pub of £38,000 per annum.

At the end of the year, 211 pubs in the sell-now category were being actively marketed for disposal. These pubs have an average profit per pub of £11,000 per annum and a book value of £38m.

It said that Matthew Clark, in which it holds 50% stake, performed strongly in the year delivering £19m of EBITDA, with a £6.2m post-tax contribution to Punch, up from £4.8m in the prior year. Punch received a dividend of £5m in the period from Matthew Clark which represented the first dividend since April 2011.

Restructuring

Following the successful completion of the capital restructuring, the company has commenced the search for a new chief executive and hopes to be in a position to announce the appointment in early 2015. Stephen Billingham will remain as executive chairman until the CEO takes office, at which point he will return to the role of non-executive chairman.

Billingham said: “We have returned the core estate to like-for-like growth and delivered underlying profits for the year in line with guidance. We have also made a positive start to the new financial year with the core estate in like-for-like net income growth of 0.8% and have realised £43m of proceeds from the sale of non-core and gold-brick sites.

“We believe that the capital restructuring completed last month creates a robust and sustainable debt structure, providing stability to the business that will lead to further deleveraging through strong cash generation.

“We can now focus on improving our business through investment in our pubs, attracting the best partners to work with us and providing industry leading support to our partners to launch and develop their pub businesses.”

Related topics: Punch Pubs & Co

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