The glass seems half full over at pub group Punch Taverns (PUB) as the new man at the pumps, boss Duncan Garrood, puts his plan into action. The group has overhauled the way it operates in light of government legislation allowing publicans to unknot themselves from the so-called beer tie. Management says 370 pubs could opt to go it alone in the 2017 financial year and 270 per year in the following four. It's optimistic that the Punch Buying Club, which reduces the price for publicans of drinks through to utility bills, will help encourage them to maintain the status quo.
The 'retail contract' option, where Punch retains the sales and cost of sales but pays the publican a percentage out of which to remunerate staff, has proved popular, providing a sales and profit uplift. A total of 121 pubs are expected to go this way, from 50 now. Its core estate saw like-for-like net income rise 1.6 per cent. But this was helped by 240 of its lower profit pubs being shifted to a new division, called Mercury, which applies a reduced cost operating model. This also houses the 499 non-core pubs from the former 'turnaround' division.
House broker Numis expects adjusted pre-tax profit of £50.9m in the 2016 financial year, leading to EPS of 18.1p, compared with £60.9m and 25p in FY2015.
| PUNCH TAVERNS (PUB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 101p | MARKET VALUE: | £224m | |
| TOUCH: | 101-103p | 12-MONTH HIGH: | 140p | LOW: 92p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 353p | NET DEBT: | £1.2bn | |
| Half-year to 5 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 222 | 349 | 198 | nil |
| 2016 | 213 | 55 | 26 | nil |
| % change | -4 | -84 | -87 | - |
