Punch in pieces

Ahead of the planned summer demerger, details of which were announced last month, Punch has decided more pubs than previously thought need to be designated as non-core. It has therefore adjusted their carrying valued to reflect what management thinks it will get for them during its planned five-year, 2,400-pub sell-off. The result is a £367m first-half write-down - equivalent to a whopping 7.7 per cent of the carrying value of the entire estate - plus the eradication of £81m of associated goodwill. After accounting for other one-off items, including a £43m tax credit, the overall exceptional charge for the half was £370m.

The massive write-down puts into perspective some of the positive messages from the half-year results. The best news came from the 798 managed pubs that will form part of the good-pub company, to be known as Spirit. Increased marketing, investment in refurbishment and strong food sales helped lift like-for-like sales there by 4.9 per cent. The like-for-like net income from Spirit’s 554 leased pubs, however, was down 6.3 per cent. Following the demerger, management plans to convert between 100 and 150 of these into managed pubs and sell the rest.

The bad-pub business is showing signs of stabilising. The like-for-like net income decline slowed to 7 per cent. This portion of the group, which will retain the Punch name, plans to focus on 3,000 core pubs following the five-year disposal programme. The business needed a £42m injection from the rest of the group to allow two tranches of debt, which are secured against its struggling pubs, to adhere to key debt-service-cover-ratio covenants.

It's intended that chief executive Ian Dyson will take up the same rolls at Spirit, while Roger Whiteside, managing director of the leased division, will become chief executive of the new Punch and acting finance director Steve Dando will be Punch’s finance director.

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