It may have dealt with its debt woes, but the introduction of a new Market Rent Option (MRO) for UK pubs has set troubled pub operator Punch Taverns (PUB) back on edge. The legislation to ban so-called 'wet rent' received Royal Assent on 26 March 2015, but it could take up to another year for the laws to be finalised.
Encouragingly, management appears to be on the case. Although the group is adamant that the proposed legislation is "contrary to existing legal contracts and property rights", it is already reviewing several tenancy and lease sites and drafting new commercial free-of-tie lease agreements. It's also put several investment-heavy projects on the back burner.
In the meantime, Punch has plenty to do to put the rest of its business back on track. A capital restructuring last October cut £576m from the debt pile. Now, any long-term debt is secured against Punch's pub estate, which was revalued last August at £2.13bn. That helps explain the perky interim pre-tax profit figure, which was boosted by a £375m gain from the capital restructuring. On an underlying basis interim pre-tax profits dropped to £30m, from £50m.
Analysts at Numis still expect pre-tax profits of £57m for the year to August, giving EPS of 22.7p. That compares with £38.7m and 91.7p in 2014.
| PUNCH TAVERNS (PUB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 103p | MARKET VALUE: | £229m | |
| TOUCH: | 101-105p | 12-MONTH HIGH: | 295p | LOW: 87p |
| DIVIDEND YIELD: | nil | PE RATIO: | 3 | |
| NET ASSET VALUE: | 391p* | NET DEBT: | 168% | |
| Half-year to 7 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 234 | -175 | -360 | nil |
| 2015 | 222 | 349 | 198 | nil |
| % change | -5 | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of £168m, or 76p a share | ||||
