Punch's first half results did not herald the trading improvement that many were desperately hoping for and debt still looms large despite a significant reduction over the last year and a half.
While rival Enterprise Inns has recently showed a first quarter improvement, in the first half Punch's key tenanted-pub division posted an 11 per cent like-for-like cash profits decline. Financial support for tenants is currently running at £2m compared with an average of £1.6m last year. The group's own-managed pubs experienced a 3.4 per cent like-for-like sales fall, but part of this reflects efforts to rebuild the division’s margins.
The group will invest £20m in the tenanted estate to try and pep up performance ahead of the football World Cup. It is also introducing more flexible lease agreements and has only increased most of the beer prices for its tenants this year by 1 per cent compared with a 3 per cent increase in the wholesale price. And following the trialling of new formats in the managed estate, Punch plans to invest £50m a year on roll outs.
Turning trading around will be a big job and the board is currently looking to appoint a new chief executive following the surprise news that Giles Thorley would be stepping down.
Where most progress has been made is in Punch's effort to reduce borrowings. With the help of a further £198m of pub sales in the first half, net debt is now down to £3.69bn, which represents a £1.3bn fall over the last 12 months. The group plans to keep the debt reduction efforts up with a target to raise £300m from pub sales for the year as a whole. However, the opportunity to buy debt from distressed sellers at substantial discounts to face value now looks like it has passed.
Broker Charles Stanley forecasts full year pre-tax profits of £126m and EPS of 13.9p (2009: £160m/36.1p).
| Punch Taverns (PUB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 96p | MARKET VALUE: | £617m | |
| TOUCH: | 96-97p | 12-MONTH HIGH: | 182p | LOW: 64p |
| DIVIDEND YIELD: | nil | PE RATIO: | NA | |
| NET ASSET VALUE*: | 272p | NET DEBT: | 211% | |
| Half-year to 6 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2007 | 768 | -121.6 | -45.9 | nil |
| 2008 | 677 | 70.3 | 9.2 | nil |
| % change | -12 | - | - | |
* includes intangibles of £500m or 78p a share | ||||
