Punch reassure investors

Punch Taverns brought forward and announced its trading statement yesterday, in order to allay fears that it would have to restructure its debt following an 18% fall in its share price. The Interim Management Statement had been scheduled for delivery on July 7, but it was brought forward to reassure that trading was ‘in line with expectations’.

A presentation will still go ahead on 7 July when the group will give more details concerning its financing and its thinking regarding a possible conversion into a real estate investment trust (REIT). Punch is the leading pub company in the UK, with over 8,400 pubs across its leased and managed portfolio.

Giles Thorley, Punch’s chief executive, stated that the share price fluctuations were down to short-selling and a “concerted effort by a couple of analysts” to talk down the company’s health, after they claimed that the pub group was in danger of breaching its banking covenants. There were also claims that in the event of a recession, Punch would find it difficult to access cash due to its securitised debt structure.

After opening at 342.25, the share price fell to a low of 279.25, the biggest one-day fall since the company’s flotation in 2002, before eventually recovering to 318.25p.

Thorley continued, “Until two weeks ago the share price was largely tracking the market. [The analysts] were totally misrepresenting our position.”

The company also said that it would be able to convert to a REIT without losing Spirit, its managed pub business, despite the fact that many analysts regarded this move as essential if they were to convert.

However, observers noted that the comment about the REIT possibility was delivered with little enthusiasm, as it was at pains to stress the cost involved in such a move, and did not commit the group to the idea should they be given the green light.

Although Punch did face its detractors head-on with something of a pre-emptive strike, stating that there would be no need for refinancing in the near term, the convertible will need refinancing before its December 2010 expiry. Ultimately, better trading is required to pull clear of any future mire, but this is far from certain, with trade in general not improving.

Alexis Hercules, 25/06/08